Exam 8: Changes in Ownership Interest

If a subsidiary issues new shares of its stock to noncontrolling stockholders, the book value of the parent's interest in the subsidiary may:

On January 1, 2012, Pharma Company purchased 16,000 of the 20,000 outstanding common shares of Sludge Company for $760,000. On January 1, 2016, Pharma Company sold 2,000 of its shares of Sludge Company on the open market for $90 per share. Sludge Company's stockholders' equity on January 1, 2012, and January 1, 2016, was as follows: The difference between implied and book value is assigned to Sludge Company's land. As a result of the sale, Pharma Company's Investment in Sludge account should be credited for:

Under the partial equity method, the workpaper entry that reverses the effect of subsidiary income for the year includes a:

The purchase by a subsidiary of some of its shares from the noncontrolling stockholders results in an increase in the parent's percentage interest in the subsidiary. The parent company's share of the subsidiary's net assets will increase if the shares are purchased:

If a portion of an investment is sold, the value of the shares sold is determined by using the:

P Corporation purchased an 80% interest in S Corporation on January 1, 2016, at book value for $300,000. S's net income for 2016 was $90,000 and no dividends were declared. On May 1, 2016, P reduced its interest in S by selling a 20% interest, or one-fourth of its investment for $90,000. What will be the Consolidated Gain on Sale and Subsidiary Income Sold for 2016?

On January 1, 2016, P Corporation purchased 75% of S Corporation for $500,000. S's stockholders' equity on that date was equal to $600,000 and S had 40,000 shares issued and outstanding on that date. S Corporation sold an additional 8,000 shares of previously unissued stock on December 31, 2016. Assume S sold the 8,000 shares to outside interests, P's percent ownership would be:

On January 1, 2012, Pine Corporation purchased 24,000 of the 30,000 outstanding common shares of Summit Company for $1,140,000. On January 1, 2016, Pine Corporation sold 3,000 of its shares of Summit Company on the open market for $90 per share. Summit Company's stockholders' equity on January 1, 2012, and January 1, 2016, was as follows: The difference between implied and book value is assigned to Summit Company's land. As a result of the sale, Pine Corporation's Investment in Summit account should be credited for:

On January 1, 2014, Panel Company acquired 90% of the common stock of Singapore Company for $650,000. At that time, Singapore had common stock ($5 par) of $500,000 and retained earnings of $200,000. On January 1, 2016, Singapore issued 20,000 shares of its unissued common stock, with a market value of $7 per share, to noncontrolling stockholders. Singapore's retained earnings balance on this date was $300,000. Any difference between cost and book value relates to Singapore's land. No dividends were declared in 2016. Required: A. Prepare the entry on Panel's books to record the effect of the issuance assuming the cost method. B. Prepare the elimination entries for the preparation of a consolidated statements workpaper on December 31, 2016 assuming the cost method.

On January 1, 2016, P Corporation purchased 75% of S Corporation for $500,000. S's stockholders' equity on that date was equal to $600,000 and S had 40,000 shares issued and outstanding on that date. S Corporation sold an additional 8,000 shares of previously unissued stock on December 31, 2016. Assume that P Corporation purchased the additional shares what would be their current percentage ownership on December 31, 2016?

If a parent company acquires additional shares of its subsidiary's stock directly from the subsidiary for a price less than their book value:

On January 1, 2012, Pharma Company purchased 16,000 of the 20,000 outstanding common shares of Sludge Company for $760,000. On January 1, 2016, Pharma Company sold 2,000 of its shares of Sludge Company on the open market for $90 per share. Sludge Company's stockholders' equity on January 1, 2012, and January 1, 2016, was as follows: The difference between implied and book value is assigned to Sludge Company's land. Assuming no other equity transactions, the amount of the difference between implied and book value that would be added to land on a work paper for the preparation of consolidated statements on December 31, 2016 would be: