Exam 9: Indirect and Mutual Holdings

On January 1, 2014, Wrobel Company acquired a 90 percent interest in Sally Company for $270,000. On January 1, 2014, Sally's total stockholders' equity was $300,000. The fair value and book value of Sally's individual assets and liabilities were equal. On January 2, 2014, Sally Company acquired a 10 percent interest in Wrobel Company for $70,000. On January 2, 2014, Wrobel's total stockholders' equity was $700,000. The fair value and book value of Wrobel's individual assets and liabilities were equal. For the year ending December 31, 2014, the following data is available: The treasury stock method is used to account for the mutual stock holdings between Wrobel and Sally. The separate net incomes do not include investment income. A partial working paper is available for the year ending December 31, 2014. Required: Prepare the elimination entries for the year ending December 31, 2014. Do not enter them onto the worksheet. Instead, list them below.

The equation, in a set of simultaneous equations, that computes Paiva Corporation income on a consolidated basis is

On January 1, 2014, Paul Corporation acquired a 90% interest in Satorius Company for $360,000 when Satorius' stockholders' equity was $400,000; with Common stock of $200,000 and Retained earnings of $200,000. On January 1, 2014, Satorius Company purchased a 10% interest in Paul Company for $90,000 when Paul's total stockholders' equity was $900,000; with Common stock of $500,000 and Retained earnings of $400,000. The following data was available for the year ending December 31, 2014: Use the conventional approach to account for the mutually-held stock. Assume there were no book value/fair value differentials for each investment. The separate net incomes do not include investment income. Required: 1. Prepare the journal entry for Paul on January 1, 2014. 2. Prepare the journal entry for Satorius on January 1, 2014. 3. Prepare the journal entry to record the constructive retirement of 10% of Paul's outstanding stock due to Satorius' purchase of Paul's stock. 4. Determine the incomes of Paul and Satorius on a consolidated basis with mutual income for 2014 using simultaneous equations. 5. What is controlling interest share of consolidated net income and noncontrolling interest shares for 2014? 6. What is consolidated net income?

Pablo Corporation acquired 60% of Abagia Corporation on January 1, 2013, at a cost of $20,000 in excess of book value. Also, on July 1, 2013, Pablo acquired 60% of Babin Corporation at book value. On January 1, 2014, Abagia acquired a 20% interest in Babin at a cost of $10,000 in excess of book value. The excess purchase costs paid by Pablo and Abagia were attributed to goodwill. On July 1, 2014, Pablo sold land with a book value of $20,000 to Abagia for $40,000. The $20,000 unrealized gain is included in Pablo's separate income. Separate net incomes for the affiliated companies (excluding investment income) for 2014 are: Controlling interest share of consolidated net income for 2014 is

The net income reported for Pahm Corporation for the current year is

On January 1, 2014, Klode Corporation acquired an 80% interest in Savy Company for $400,000 when Savy's stockholders' equity was $500,000; with Common stock $400,000 and Retained earnings $100,000. On January 1, 2014, Savy purchased a 10% interest in Klode for $50,000 when Klode's total stockholders' equity was $500,000; with Common stock $400,000 and Retained earnings $100,000. The following data was available for the year ending December 31, 2014: Use the conventional approach to account for the mutually-held stock. Assume there were no book value/fair value differentials for each investment. The separate net incomes do not include investment income. Required: 1. Prepare the journal entry for Klode on January 1, 2014. 2. Prepare the journal entry for Savy on January 1, 2014. 3. Prepare the journal entry to record the constructive retirement of 10% of Klode's outstanding stock due to Savy's purchase of Klode's stock. 4. Determine the incomes of Klode and Savy on a consolidated basis with mutual income for 2014 using simultaneous equations. 5. What is controlling interest share of consolidated net income and noncontrolling interest shares for 2014?

Controlling interest share of consolidated net income for the current year is

Ackroyd's noncontrolling interest share for 2014 is

On January 1, 2014, Singh Company acquired an 80 percent interest in Gonzalez Company for $300,000. On January 1, 2014, Gonzalez's total stockholders' equity was $375,000. The fair value and book value of Gonzalez's individual assets and liabilities were equal. On January 2, 2014, Gonzalez Company acquired a 10 percent interest in Singh Company for $50,000. On January 2, 2014, Singh's total stockholders' equity was $500,000. The fair value and book value of Singh's individual assets and liabilities were equal. For the year ending December 31, 2014, the following data is available: The treasury stock method is used to account for the mutual stock holdings between Singh and Gonzalez. The separate net incomes do not include investment income. Required: 1. What is Gonzalez's income from Singh for 2014? 2. What is Singh's income from Gonzalez for 2014? 3. What is the noncontrolling interest share associated with Gonzalez Company for 2014? 4. Prepare the elimination entry for Gonzalez's Investment in Singh Company.

The amount of income for the current year assigned to the noncontrolling shareholders of Badock Corporation is

Paine Corporation owns 90% of Achan Corporation, Achan Corporation owns 85% of Badge Corporation, and Badge Corporation owns 5% of Achan Corporation. The separate net incomes (excluding investment income) of Paine, Achan, and Badge are $400,000, $160,000, and $220,000, respectively. Assume the investments were acquired at a cost equal to the book value of each investment, which also equals the fair value. Required: 1. Calculate revised net incomes for Paine, Achan, and Badge by using the conventional method. 2. Determine the controlling interest share of consolidated net income and the noncontrolling interest shares.

On January 1, 2014, Pauline Company acquired 90% of Stephen Company at a cost of $90,000. On January 1, 2014, Stephen Company acquired 10% of Pauline Company at a cost of $10,000. On January 1, 2014, the following data is available: At December 31, 2014, the following data is available: Assuming the treasury stock method is used, what elimination entry is needed for the Investment in Pauline at December 31, 2014?

Raymond Company owns 90% of Rachel Company. Rachel Company owns 10% of Raymond Company. The treasury stock method is used. On the books of Rachel Company, we maintain the Investment in Raymond using the ________ method. The ending balance in Investment in Raymond is ________ stockholders' equity in the consolidated balance sheet.

Pabari Corporation owns an 80% interest in Alders Corporation and Alders owns a 60% interest in Babao Corporation. Both interests were acquired at a cost equal to book value equal to fair value. During 2013, Alders sells land to Babao at a profit of $12,000. Babao still holds the land at December 31, 2013 Net income(loss) of the three companies (excluding investment income) for 2013 are: Controlling interest share of consolidated net income and noncontrolling interest share, respectively, for 2013 are

The controlling interest share of consolidated net income for the current year is

Page Corporation acquired a 60% interest in Ace Corporation at a price $40,000 in excess of book value and fair value on January 1, 2013. On the same date, Ace acquired a 70% interest in Bader Corporation at a price $30,000 in excess of book value and fair value. The excess purchase cost paid by Page and Ace was attributed to goodwill. Separate net incomes (excluding investment income) for the three affiliates for 2013 are as follows: Page, $500,000, Ace, $300,000, and Bader, $400,000. Page's controlling interest share of consolidated net income for 2013 is

Noncontrolling interest share for Badrack is

Paik Corporation owns 80% of Acdol Corporation and 60% of Ben Corporation. Acdol Corporation owns 10% of Ben Corporation. All subsidiary investments were acquired at book value. There are no fair value/book value differentials associated with each investment. Separate net incomes (excluding investment income) of the affiliated companies for 2014 are: Paik: $600,000 which includes $60,000 unrealized losses on inventory items sold to Ben Acdol: $360,000 Ben: $340,000 which includes $100,000 unrealized profit on land sold to Acdol Required: Determine controlling interest share of consolidated net income and noncontrolling interest shares for Paik Corporation and Subsidiaries for 2014.

Padhy Corporation owns 80% of Abrams Corporation, Abrams Corporation owns 60% of Bacud Corporation, and Bacud Corporation owns 10% of Abrams Corporation. The separate net incomes (excluding investment income) of Padhy, Abrams, and Bacud are $300,000, $100,000, and $80,000, respectively. Assume the investments were acquired at a cost equal to the book value of each investment, which also equals the fair value. Required: 1. Calculate revised net incomes for Padhy, Abrams and Bacud by using the conventional method. 2. Calculate the controlling interest share of consolidated net income and the noncontrolling interest shares for Padhy Corporation and its subsidiaries. Use the conventional method for your solution.

Paco Corporation owns 90% of Aber Corporation, Aber Corporation owns 85% of Back Corporation, and Back Corporation owns 5% of Aber Corporation. The separate net incomes (excluding investment income) of Paco, Aber, and Back are $100,000, $40,000, and $55,000, respectively. Assume the investments were acquired at a cost equal to the book value of each investment, which also equals the fair value. Required: 1. Calculate revised net incomes for Paco, Aber, and Back by using the conventional method. 2. Determine the controlling interest share of consolidated net income and the noncontrolling interest shares.