Exam 9: Consolidation Ownership Issues

Vision Corporation acquired 75 percent of the stock of Meta Company on January 1, 20X7, for $225,000.At that date, the fair value of the noncontrolling interest was $75,000. Meta's balance sheet contained the following amounts at the time of the combination: During each of the next three years, Meta reported net income of $30,000 and paid dividends of $10,000. On January 1, 20X9, Vision sold 1,500 shares of Meta's $10 par value shares for $60,000 in cash. Vision used the fully adjusted equity method in accounting for its ownership of Meta Company. Based on the preceding information, in the eliminating entries to complete a full consolidation worksheet, Investment in Meta Stock at January 1, 20X9, will be credited for:

Winner Corporation acquired 80 percent of the common shares and 70 percent of the preferred shares of First Corporation at underlying book value on January 1, 20X9. At that date, the fair value of the noncontrolling interest in First's common stock was equal to 20 percent of the book value of its common stock. First's balance sheet at the time of acquisition contained the following balances: The preferred shares are cumulative and have a 10 percent annual dividend rate and are four years in arrears on January 1, 20X9. All of the $5 par value preferred shares are callable at $6 per share. During 20X9, First reported net income of $100,000 and paid no dividends. Based on the preceding information, what is First's contribution to consolidated net income for 20X9?

Winner Corporation acquired 80 percent of the common shares and 70 percent of the preferred shares of First Corporation at underlying book value on January 1, 20X9. At that date, the fair value of the noncontrolling interest in First's common stock was equal to 20 percent of the book value of its common stock. First's balance sheet at the time of acquisition contained the following balances: The preferred shares are cumulative and have a 10 percent annual dividend rate and are four years in arrears on January 1, 20X9. All of the $5 par value preferred shares are callable at $6 per share. During 20X9, First reported net income of $100,000 and paid no dividends. Based on the preceding information, what will be the amount of income to be assigned to the noncontrolling interest in the 20X9 consolidated income statement?

X Corporation owns 80 percent of Y Corporation's common stock and 40 percent of Z Corporation's common stock. Additionally, Y Corporation owns 35 percent of Z Corporation's common stock. The acquisitions were made at book values. The following information is available for 20X8: Based on the information provided, what amount will be reported as dividends declared in X Corporation's 20X8 consolidated retained earnings statement?

On January 1, 2008, Orion Company acquired 70 percent of Simplex Company's stock at underlying book value. At that date, the fair value of the noncontrolling interest was equal to 30 percent of the book value of Simplex Company. On December 31, 2009, Simplex acquired 15 percent of Orion's stock. Balance sheets for the two companies on December 31, 2009, are as follows: Required: Assuming that the treasury stock method is used in reporting Orion's shares held by Simplex, prepare the elimination entries and a consolidated balance sheet worksheet for December 31, 2009.

Perfect Corporation acquired 70 percent of Trevor Company's shares on December 31, 2008, for $140,000. At that date, the fair value of the noncontrolling interest was $60,000. On January 1, 2010, Perfect acquired an additional 10 percent of Trevor's common stock for $32,500. Summarized balance sheets for Trevor on the dates indicated are as follows: Trevor paid dividends of $10,000 in each of the three years. Perfect uses the fully adjusted equity method in accounting for its investment in Trevor and amortizes all differentials over 5 years against the related investment income.All differentials are assigned to patents in the consolidated financial statements. Based on the preceding information, Trevor Company's net income for 2009 and 2010 are:

Vision Corporation acquired 75 percent of the stock of Meta Company on January 1, 20X7, for $225,000.At that date, the fair value of the noncontrolling interest was $75,000. Meta's balance sheet contained the following amounts at the time of the combination: During each of the next three years, Meta reported net income of $30,000 and paid dividends of $10,000. On January 1, 20X9, Vision sold 1,500 shares of Meta's $10 par value shares for $60,000 in cash. Vision used the fully adjusted equity method in accounting for its ownership of Meta Company. Based on the preceding information, what was the balance in the investment account reported by Vision on January 1, 20X9, before its sale of shares?

On January 1, 20X9, Company A acquired 80 percent of the common stock and 60 percent of the preferred stock of Company B, for $400,000 and $60,000, respectively. At the time of acquisition, the fair value of the common shares of Company B held by the noncontrolling interest was $100,000. Company B's balance sheet contained the following balances: For the year ended December 31, 20X9, Company B reported net income of $100,000 and paid dividends of $40,000. The preferred stock is cumulative and pays an annual dividend of 10 percent. Based on the preceding information, the eliminating entry to prepare the consolidated financial statements for Company A as of December 31, 20X9 will include a credit to Investment in Company B-Common Stock for:

Perfect Corporation acquired 70 percent of Trevor Company's shares on December 31, 2008, for $140,000. At that date, the fair value of the noncontrolling interest was $60,000. On January 1, 2010, Perfect acquired an additional 10 percent of Trevor's common stock for $32,500. Summarized balance sheets for Trevor on the dates indicated are as follows: Trevor paid dividends of $10,000 in each of the three years. Perfect uses the fully adjusted equity method in accounting for its investment in Trevor and amortizes all differentials over 5 years against the related investment income.All differentials are assigned to patents in the consolidated financial statements. Based on the preceding information, what was the balance in Perfect's Investment in Trevor Company Stock account on December 31, 2009?

Vision Corporation acquired 75 percent of the stock of Meta Company on January 1, 20X7, for $225,000.At that date, the fair value of the noncontrolling interest was $75,000. Meta's balance sheet contained the following amounts at the time of the combination: During each of the next three years, Meta reported net income of $30,000 and paid dividends of $10,000. On January 1, 20X9, Vision sold 1,500 shares of Meta's $10 par value shares for $60,000 in cash. Vision used the fully adjusted equity method in accounting for its ownership of Meta Company. Based on the preceding information, in the journal entry recorded by Vision for sale of shares, Additional Paid-in Capital will be credited for:

Micron Corporation owns 75 percent of the common shares and 60 percent of the preferred shares of Stanley Company, all acquired at underlying book value on January 1, 20X8. At that date, the fair value of the noncontrolling interest in Stanley's common stock was equal to 25 percent of the book value of its common stock. The balance sheets of Micron and Stanley immediately after the acquisition contained these balances: Stanley's preferred stock pays a 12 percent dividend and is cumulative. For 20X8, Stanley reports net income of $40,000 and pays no dividends. Micron reports income from its separate operations of $75,000 and pays dividends of $30,000 during 20X8. Based on the preceding information, what is the total stockholders' equity reported in the consolidated balance sheet as of January 1, 20X8?

On January 1, 20X7, Pisa Company acquired 80 percent of Siena Company by purchasing 40,000 shares of Siena's common stock. There was no differential related to this transaction. The noncontrolling interest had a fair value equal to 20 percent of book value. The book value of Siena on December 31, 20X7 was as follows: On January 1, 20X8, Pisa purchased an additional 12,500 shares directly from Siena for $25 per share. Based on the preceding information, the ending balance in Additional Paid-In Capital would be:

Winner Corporation acquired 80 percent of the common shares and 70 percent of the preferred shares of First Corporation at underlying book value on January 1, 20X9. At that date, the fair value of the noncontrolling interest in First's common stock was equal to 20 percent of the book value of its common stock. First's balance sheet at the time of acquisition contained the following balances: The preferred shares are cumulative and have a 10 percent annual dividend rate and are four years in arrears on January 1, 20X9. All of the $5 par value preferred shares are callable at $6 per share. During 20X9, First reported net income of $100,000 and paid no dividends. Based on the information provided, what amount will be reported as the noncontrolling interest in the consolidated balance sheet on January 1, 20X9?

Lemon Corporation acquired 80 percent of Bricks Corporation's common shares on January 1, 20X7, at underlying book value. At that date, the fair value of the noncontrolling interest was equal to 20 percent of the book value of Bricks Corporation. Bricks prepared the following balance sheet as of December 31, 20X8: On January 1, 20X9, Bricks declares a stock dividend of 9,000 shares on its $5 par value common stock. The current market price per share of Bricks stock on January 1, 20X9, is $20. Begin with information provided, but assume instead that Bricks declared a stock dividend of 3,000 shares on its $5 par value common stock. The investment elimination entry required to prepare a consolidated balance sheet immediately after the stock dividend is issued will include a debit to Additional Paid-In Capital for:

Perfect Corporation acquired 70 percent of Trevor Company's shares on December 31, 2008, for $140,000. At that date, the fair value of the noncontrolling interest was $60,000. On January 1, 2010, Perfect acquired an additional 10 percent of Trevor's common stock for $32,500. Summarized balance sheets for Trevor on the dates indicated are as follows: Trevor paid dividends of $10,000 in each of the three years. Perfect uses the fully adjusted equity method in accounting for its investment in Trevor and amortizes all differentials over 5 years against the related investment income. All differentials are assigned to patents in the consolidated financial statements. Based on the preceding information, what was the balance in Perfect's Investment in Trevor Company Stock account on December 31, 2010?

Janet Corporation holds 75 percent of Slider Corporation's voting common stock, acquired at book value.The fair value of the noncontrolling interest at the date of acquisition was equal to 25 percent of the book value of Slider Corporation. On December 31, 20X8, Slider Corporation acquired 25 percent of Janet Corporation's stock. Slider records dividends received from Janet as nonoperating income. In 20X9, Janet reported operating income of $100,000 and paid dividends of $40,000. During the same year, Slider reported operating income of $75,000 and paid $20,000 in dividends. Based on the information provided, what amount will be reported as income assigned to the controlling interest for 20X9 under the treasury stock method?

Cinema Company acquired 70 percent of Movie Corporation's shares on December 31, 20X5, at underlying book value of $98,000. At that date, the fair value of the noncontrolling interest was equal to 30 percent of the book value of Movie Corporation. Movie's balance sheet on January 1, 20X8, contained the following balances: On January 1, 20X8, Movie acquired 5,000 of its own $2 par value common shares from Nonaffiliated Corporation for $6 per share. Based on the preceding information, what is the increase in the book value of the equity attributable to the parent as a result of the repurchase of shares by Movie Corporation?

Micron Corporation owns 75 percent of the common shares and 60 percent of the preferred shares of Stanley Company, all acquired at underlying book value on January 1, 20X8. At that date, the fair value of the noncontrolling interest in Stanley's common stock was equal to 25 percent of the book value of its common stock. The balance sheets of Micron and Stanley immediately after the acquisition contained these balances: Stanley's preferred stock pays a 12 percent dividend and is cumulative. For 20X8, Stanley reports net income of $40,000 and pays no dividends. Micron reports income from its separate operations of $75,000 and pays dividends of $30,000 during 20X8. Based on the preceding information, what amount is reported as preferred stock outstanding reported in the consolidated balance sheet as of January 1, 20X8?

Cinema Company acquired 70 percent of Movie Corporation's shares on December 31, 20X5, at underlying book value of $98,000. At that date, the fair value of the noncontrolling interest was equal to 30 percent of the book value of Movie Corporation. Movie's balance sheet on January 1, 20X8, contained the following balances: On January 1, 20X8, Movie acquired 5,000 of its own $2 par value common shares from Nonaffiliated Corporation for $6 per share. Based on the preceding information, in the eliminating entry needed in preparing a consolidated balance sheet immediately following the acquisition of shares, Investment in Movie stock will be credited for:

Lemon Corporation acquired 80 percent of Bricks Corporation's common shares on January 1, 20X7, at underlying book value. At that date, the fair value of the noncontrolling interest was equal to 20 percent of the book value of Bricks Corporation. Bricks prepared the following balance sheet as of December 31, 20X8: On January 1, 20X9, Bricks declares a stock dividend of 9,000 shares on its $5 par value common stock. The current market price per share of Bricks stock on January 1, 20X9, is $20. Begin with the information provided, but assume instead that Bricks declared a stock dividend of 3,000 shares on its $5 par value common stock. The investment elimination entry required to prepare a consolidated balance sheet immediately after the stock dividend is issued will include a debit to Retained Earnings for: