A partially owned subsidiary declared dividend and half remains unpaid by the end of the year, which of the following is CORRECT? A. The total amount of the dividend will be eliminated in the working paper elimination entry by debiting “dividend” account. B. Half of the amount of the dividend will be used to reduce the profit of the parent for consolidation purposes. C. The elimination entry will include a debit to non-controlling interest for the amount of dividend received by the non-controlling shareholders. D. The transaction will increase the balance of NCI at the

A partially owned subsidiary declared dividend and half remains unpaid by the end of the year, which of the following is CORRECT? A. The total amount of the dividend will be eliminated in the working paper elimination entry by debiting “dividend” account. B. Half of the amount of the dividend will be used to reduce the profit of the parent for consolidation purposes. C. The elimination entry will include a debit to non-controlling interest for the amount of dividend received by the non-controlling shareholders. D. The transaction will increase the balance of NCI at the

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter8: Investing Activities

Section: Chapter Questions

Problem 2DIC

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A wholly owned subsidiary declared dividend and half remains unpaid bythe end of the year, which of the following is TRUE? a. Only half of the amount of the dividend will be used to reduce the profit ofthe parent for consolidation purposes. b. The total amount of the dividend will be eliminated in the working paperelimination entry by debiting “dividend revenue” account.c. The transaction will have an impact in the computation of the balance ofNCI at the end.d. The elimination entry will include a debit to non-controlling interest for theamount of dividend received by the non-controlling shareholders.
Prepare consolidation worksheet entries for December 31, 2021 -Prepare entry S to eliminate stockholders' equity accounts of subsidiary for 2021. Prepare entry A to recognize allocations attributed to specific accounts at acquisition date for 2021. Prepare entry I to eliminate the income accrual for 2021 less the amortization recorded by the parent using the equity method. Prepare entry D to eliminate intra-entity dividend transfers. Prepare entry E to recognize current year amortization expense.
It is common for a parent firm to record its investment in a subsidiary under either the cost or simple equity method to expedite the elimination process. This does create some complications, however, when all or a portion of the investment is sold. Assume that in each of the following cases, the parent sells its investment midway through its fiscal year.(1) The parent owned an 80% interest and sold all of its holdings.(2) The parent owned an 80% interest and sold a 20% interest to reduce its ownership percentage to 60%.(3) The parent owned an 80% interest and sold a 60% interest to reduce its ownership percentage to 20%.Required:a. For each of the above cases, comment on the procedures necessary to record the sale, where the investment is carried under simple equity, and the impact on consolidated income of the sale.b. For each of the above cases, state the added procedures that would be necessary if the investment was recorded under the cost method.
Which of the following is true regarding consolidation of net income?A. Parent net income is decreased by the dividend income recognized due to declared bysubsidiary at full amount even if less than 100% ownership is acquired.B. Amortization of excess must be done to adjust net income of parent to arrive at parent netincome own operation.C. Adjusted net income of subsidiary is shared by Parent’s holding interest andnoncontrolling interest.D. Dividend declared by subsidiary is shared by Parent’s holding interest and noncontrollinginterest.
When a parent company uses the equity method to account for investment in a subsidiary, the amortization expense entry recorded during the year is eliminated on a consolidation worksheet as a component of Entry
One company purchases the outstanding debt instruments of an affiliated company on the open market. This transaction creates a gain that is appropriately recognized in the consolidated financial statements of that year. Thereafter, a worksheet adjustment is required to correct the beginning balance of consolidated Retained Earnings (or the parent’s Investment in Subsidiary account when the equity method is employed). Why is the amount of this adjustment reduced from year to year?
When the parent's Investment in S account is eliminated in the consolidation process, what replaces this item on the consolidated financial statements? A) The acquisition-date fair values of S's net assets, adjusted for any post-acquisition amortization of Differential. B) The acquisition-date book values of S's net assets, adjusted for any post-acquisition amortization of Differential. C) The book value of S's net assets and S's beginning retained earnings only. D) Only the new goodwill generated from the transaction.
Parent Company sells land with book value of P5,000 to Subsidiary Company for P6,000 in 2020. Subsidiary Company holds the land during 2021. Subsidiary Company sells the land for P8,000 to an outside entity in 2022. In 2020, the unrealized gain: A. Is initially included in the subsidiary’s accounts and must be eliminated from Parent Company’s income from Subsidiary Company under the cost method B. Is eliminated from consolidated net income by a working paper entry that includes a credit to the land account for P6,000 C. Is eliminated from consolidated net income by a working paper entry that includes a credit to the land account for P1,000 D. To be eliminated is affected by the non-controlling interest percentage
Examine how do you treat the following items when X Ltd. is merging with Y Ltd. on 1st January 2023 on the assumption: A. Condition u/s 2(1B) and u/s 72A does not satisfy B. Condition u/s 2(1B) satisfy but conditions u/s 72A not satisfy C. Conditions u/s 2(1B) and u/s 72A are satisfied Other Information of X Ltd.: (i) Business Profits (before adjusting losses and expenses) *60,000 (ii) Expenses on merger *2,00,000 (iii) VRS Compensation (Paid during 2020-21) *4,00,000 (iv) Sale consideration of non-depreciable capital assets *20,00,00 (v) Indexed cost of acquisition of non-depreciable capital assets *12,00,000 (vi) Sale consideration of depreciable assets *10,00,000 (vii) WDV of depreciable assets *7,00,000 (viii) Non-speculation business loss relating to 1994-95 *3,00,000 (ix) Unabsorbed depreciation relating to 2020-21 1,50,000 (x) Long term Capital loss relating to 2021-22 *2,00,000 Business profits of Y Ltd. (before adjusting losses and expenses) ₹30,00,000 and long term capital…
S1: The non-controlling interest of a less-than-wholly owned subsidiary have aclaim on the income and net asset of the subsidiary even though the subsidiaryis consolidated with its parent and, perhaps, other subsidiaries. S2: The dividendspaid by the subsidiary to the parent is a permanent account that is closed toaccumulated profits at the end of the year. A. Only S1 is correctB. Only S2 is correctC. Both statements are incorrectD. Both statements are correct
Do not use negative signs with your answers below. Reconciliation of Cost to Equity Method Parent's pre-consolidation net income 401000 v Dividend Income 81000 v P% x Net income of subsidiary P% x AAP amortization 0 x Net income attributable to controlling interest $ 0 x b. Prepare the consolidated income statement for the current year. Do not use negative signs with your answers below. Consolidated Income Statement Sales $ 12200000 v Cost of goods sold 8120000 v Gross profit 4080000 v Operating expenses 0 x Net income Net income attributable to noncontrolling interests 0 x Net income 0 x
TRUE OR FALSE: Indicate whether the statements are true or false. 1. Assuming the parent acquired 100 percent of the subsidiary’s stock and there are no purchase differentials, the investment income recorded by the parent in the current period will equal the subsidiary’s current net income recognized subsequent to the acquisition date. 2.