Advanced Financial Accounting
12th Edition
ISBN: 9781259916977
Author: Christensen, Theodore E., COTTRELL, David M., Budd, Cassy
Publisher: Mcgraw-hill Education,
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Chapter 5, Problem 5.29P
a
To determine
Introduction: When asset held by the subsidiary are with differential, both the equity method income and consolidated net income is affected as the proportion of differential is included in parents books as part of the investment in the subsidiary. When the asset is sold it must be written off by the parent in consolidation.
The consolidation entries needed to prepare consolidation
a
Expert Solution
Explanation of Solution
Consolidation entries
| Particulars | Debit $ | Credit $ |
| Investment in S Corporation | 102,200 | |
| Cash | 102,200 | |
| (Recorded initial investment in S Corp) | ||
| Elimination entries: | ||
| Common stock | 40,000 | |
| 85,000 | ||
| Investment in S Corporation | 87,500 | |
| Non-controlling interest in net assets of S | 37,500 | |
| (Elimination of beginning investment in S by reversal) | ||
| Inventory | 6,000 | |
| Buildings & equipment | 15,000 | |
| Investment in S Corporation | 14,700 | |
| Non-controlling interest in net assets of S | 6,300 | |
| (Reclassification of differential in assets) | ||
| Accounts payable | 12,500 | |
| | 12,500 | |
| (Intercompany receivable and payable eliminated) | ||
| 80,000 | ||
| Building and equipment | 80,000 | |
| (Depreciation on building and equipment recorded) |
- Initial investment recognized by debit entry in investment account
- Beginning investment in S Eliminated by reversal
- Excess differential reclassification
- Intercompany receivable and payable eliminated by setoff
- Accumulated depreciation recognized
b
To determine
Introduction: When asset held by the subsidiary are with differential, both the equity method income and consolidated net income is affected as the proportion of differential is included in parents books as part of the investment in the subsidiary. When the asset is sold it must be written off by the parent in consolidation.
The consolidated worksheet for December 31, 20X4.
b
Expert Solution
Answer to Problem 5.29P
Net assets and liability/equity as per worksheet $938,800
Explanation of Solution
P and S
Consolidated balance sheet worksheet
December 31, 20X4
| Elimination | |||||
| P $ | S $ | Debit $ | Credit $ | Consolidation $ | |
| Cash | 50,300 | 21,000 | 71,300 | ||
| Accounts receivable | 90,000 | 44,000 | 12,500 | 121,500 | |
| Inventory | 130,000 | 75,000 | 6,000 | 211,000 | |
| Land | 60,000 | 30,000 | 90,000 | ||
| Buildings and equipment | 410,000 | 250,000 | 15,000 | 80,000 | 595,000 |
| Less: Accumulated | (150,000) | (80,000) | 80,000 | (150,000) | |
| Investment in S Corp | 102,200 | 87,500 | |||
| 14,700 | |||||
| Total Assets | 692,500 | 340,000 | 101,000 | 194,700 | 938,800 |
| Accounts payable | 152,500 | 35,000 | 12,500 | 175,000 | |
| Mortgage payable | 250,000 | 180,000 | 430,000 | ||
| Common stock | 80,000 | 40,000 | 40,000 | 80,000 | |
| Retained earnings | 210,000 | 85,000 | 85,000 | 210,000 | |
| Non-controlling in net assets S | 37,500 | ||||
| 6,300 | 43,800 | ||||
| Total Liabilities & Equity | 692,500 | 340,000 | 101,000 | 194,700 | 938,800 |
c
To determine
Introduction: When asset held by the subsidiary are with differential, both the equity method income and consolidated net income is affected as the proportion of differential is included in parents books as part of the investment in the subsidiary. When the asset is sold it must be written off by the parent in consolidation.
The consolidated balance sheet for December 31, 20X4
c
Expert Solution
Answer to Problem 5.29P
Net assets and liability/equity as per worksheet $938,800
Explanation of Solution
P and S
Consolidated balance sheet
December 31, 20X4
| $ | $ | |
| Cash | 71,300 | |
| Accounts receivable | 121,500 | |
| Inventory | 211,000 | |
| Land | 90,000 | |
| Buildings and equipment | 595,000 | |
| Less: Accumulated depreciation | (150,000) | |
| 445,000 | ||
| Total Assets | 938,800 | |
| Accounts payable | 175,000 | |
| Mortgage payable | 430,000 | |
| Common stock | 80,000 | |
| Retained earnings | 210,000 | |
| Total controlling interest | 290,000 | |
| Non-controlling in net assets S | 43,800 | |
| Total stockholders’ equity | 333,800 | |
| Total Liabilities & Equity | 938,800 |
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Chapter 5 Solutions
Advanced Financial Accounting
Ch. 5 - Where is the balance assigned to the...Ch. 5 - Why must a noncontrolling interest be reported in...Ch. 5 - Prob. 5.3QCh. 5 - Prob. 5.4QCh. 5 - Prob. 5.5QCh. 5 - Prob. 5.6QCh. 5 - Prob. 5.7QCh. 5 - Prob. 5.8QCh. 5 - Prob. 5.9QCh. 5 - Prob. 5.10Q
Ch. 5 - Under what Circumstances would a parent company...Ch. 5 - Prob. 5.12QCh. 5 - Prob. 5.13QCh. 5 - Prob. 5.14AQCh. 5 - Prob. 5.15AQCh. 5 - Consolidation Worksheet Preparation The newest...Ch. 5 - Prob. 5.2CCh. 5 - Prob. 5.3CCh. 5 - Prob. 5.4CCh. 5 - Prob. 5.5CCh. 5 - Prob. 5.1.1ECh. 5 - Prob. 5.1.2ECh. 5 - Prob. 5.1.3ECh. 5 - Prob. 5.1.4ECh. 5 - Prob. 5.2.1ECh. 5 - Prob. 5.2.2ECh. 5 - Prob. 5.2.3ECh. 5 - Prob. 5.2.4ECh. 5 - Prob. 5.2.5ECh. 5 - Prob. 5.3ECh. 5 - Prob. 5.4ECh. 5 - Balance Sheet Worksheet Problem Company owns 90...Ch. 5 - Prob. 5.6ECh. 5 - Prob. 5.7ECh. 5 - Prob. 5.8.1ECh. 5 - Prob. 5.8.2ECh. 5 - Prob. 5.8.3ECh. 5 - Prob. 5.8.4ECh. 5 - Prob. 5.8.5ECh. 5 - Prob. 5.8.6ECh. 5 - Prob. 5.8.7ECh. 5 - Prob. 5.9ECh. 5 - Prob. 5.10ECh. 5 - Prob. 5.11ECh. 5 - Prob. 5.12ECh. 5 - Prob. 5.13ECh. 5 - Prob. 5.14ECh. 5 - Prob. 5.15ECh. 5 - Prob. 5.16ECh. 5 - Prob. 5.17AECh. 5 - Prob. 5.18AECh. 5 - Prob. 5.19PCh. 5 - Prob. 5.20PCh. 5 - Prob. 5.21.1PCh. 5 - Multiple-Choice Questions on Applying the Equity...Ch. 5 - Prob. 5.21.3PCh. 5 - Prob. 5.21.4PCh. 5 - Prob. 5.22PCh. 5 - Computation of Account Balances Pencil Company...Ch. 5 - Prob. 5.24PCh. 5 - Equity Entries with Differential On January 1,...Ch. 5 - Equity Entries with Differential Plug Corporation...Ch. 5 - Prob. 5.27PCh. 5 - Prob. 5.28PCh. 5 - Prob. 5.29P
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