Smith, Inc., has the following stockholders’ equity accounts as of January 1, 20
ID: 2467192 • Letter: S
Question
Smith, Inc., has the following stockholders’ equity accounts as of January 1, 2014: Preferred stock—$100 par, nonvoting and nonparticipating, 8 percent cumulative dividend $ 2,160,000 Common stock—$10 par value 4,160,000 Retained earnings 10,160,000 Haried Company purchases all of Smith’s common stock on January 1, 2014, for $14,360,000. The preferred stock remains in the hands of outside parties. Any excess acquisition-date fair value will be assigned to franchise contracts with a 40-year remaining life. During 2014, Smith reports earning $610,000 in net income and declares $520,000 in cash dividends. Haried applies the equity method to this investment. a. What is the noncontrolling interest’s share of consolidated net income for this period? b. What is the balance in the Investment in Smith account as of December 31, 2014? c. What consolidation entries are needed for 2014? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Explanation / Answer
The statement of Smith inc as of Jan1 2014 is as follows:
1) Preferred stock at $100 par value
2) Cumulative Dividend at 8% is $2,160,000
3) Common Stock at $10 Par value is 4,160,000
4) Retained Earnings is 10,160,000
5) Smith common stock is purchased by Haried company for 14,360,000
(Balance amount spent by Haried company is 10200000)
6) Earning of smith $610,000
7) Dividends of smith $520,000
a) What is the non-controlling interest share of the consolidated net income for this period?
As per the FASB there are certain guideline that have been formulated for the calculation of the non-controling interst or the minority interest, As per the new rule all the assets and the liabilities of the aquired company must be recognized in the equity side of the balance sheet at full fair value.
b) What is the balance of investment in smith account
c) Consolidated entries for 2014
Statement of financial position as of December 2014
Particulars Smith Harried Combine Assets investment in smith 14,360,000 Current assets Trade and other receivables 610,000 Total Assets Equity and Liabilities Equity for the owners of the parentRelated Questions
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