Exam 10: Additional Consolidation Reporting Issues

New Life Corporation has just finished preparing a consolidated balance sheet,income statement,and statement of changes in retained earnings for 20X9.The following items are proposed for inclusion in the consolidated cash flow statement: New Life holds 75 percent of the voting stock of Shane Pharmaceuticals,acquired at book value on June 21,20X6.On the date of the acquisition,the fair value of the noncontrolling interest was equal to 25 percent of the book value of Shane. -Based on the preceding information,what amount will be reported in the consolidated cash flow statement as net cash used in financing activities for 20X9?

Catalyst Corporation acquired 90 percent of Trigger Corporation's common stock on September 30,20X8 for $225,000.At that date,the fair value of the noncontrolling interest was $25,000.On January 1,20X8,Trigger reported the following stockholders' equity balances: Trigger reported net income of $80,000 in 20X8,earned uniformly throughout the year,and declared and paid dividends of $10,000 on June 30 and $30,000 on December 31,20X8.Catalyst reported retained earnings of $250,000 on January 1,20X8,and had 20X8 income of $120,000 from its separate operations.Catalyst paid dividends of $50,000 on December 31,20X8.Catalyst accounts for its investment in Trigger Corporation using the fully adjusted equity method. -Based on the information provided,what is the balance of Catalyst's investment in Trigger Corporation as of December 31,20X8?

Catalyst Corporation acquired 90 percent of Trigger Corporation's common stock on September 30,20X8 for $225,000.At that date,the fair value of the noncontrolling interest was $25,000.On January 1,20X8,Trigger reported the following stockholders' equity balances: Trigger reported net income of $80,000 in 20X8,earned uniformly throughout the year,and declared and paid dividends of $10,000 on June 30 and $30,000 on December 31,20X8.Catalyst reported retained earnings of $250,000 on January 1,20X8,and had 20X8 income of $120,000 from its separate operations.Catalyst paid dividends of $50,000 on December 31,20X8.Catalyst accounts for its investment in Trigger Corporation using the fully adjusted equity method. -Based on the information provided,what is the consolidated net income reported for the year 20X8?

Catalyst Corporation acquired 90 percent of Trigger Corporation's common stock on September 30,20X8 for $225,000.At that date,the fair value of the noncontrolling interest was $25,000.On January 1,20X8,Trigger reported the following stockholders' equity balances: Trigger reported net income of $80,000 in 20X8,earned uniformly throughout the year,and declared and paid dividends of $10,000 on June 30 and $30,000 on December 31,20X8.Catalyst reported retained earnings of $250,000 on January 1,20X8,and had 20X8 income of $120,000 from its separate operations.Catalyst paid dividends of $50,000 on December 31,20X8.Catalyst accounts for its investment in Trigger Corporation using the fully adjusted equity method. -Based on the information provided,what is the amount of consolidated retained earnings as of December 31,20X8?

Sigma Company develops and markets organic food products to natural foods retailers.The following information is available for the company for the year 20X8: -Based on the preceding information,what amount will be reported by the company as cash payments to suppliers for 20X8?

On July 1,20X8,Fair Logic Corporation acquires 75 percent of Integrated Systems Inc.common stock for its underlying book value.At the time of acquisition,the fair value of the noncontrolling interest is equal to its proportionate share of book value of Integrated Systems.On January 1,20X8 Integrated reported common stock of $100,000 and retained earnings of $130,000.For the year 20X8,Integrated reports the following items: Fair Logic uses the equity method in accounting for this investment. -Based on the preceding information,what is the fair value of the noncontrolling interest at the time of acquisition?

Using the data presented in question 38: 1)Prepare a worksheet to develop a consolidated statement of cash flows for 2008 using the direct method of computing cash flows from operations. 2)Prepare a consolidated statement of cash flows for 2008.

New Life Corporation has just finished preparing a consolidated balance sheet,income statement,and statement of changes in retained earnings for 20X9.The following items are proposed for inclusion in the consolidated cash flow statement: New Life holds 75 percent of the voting stock of Shane Pharmaceuticals,acquired at book value on June 21,20X6.On the date of the acquisition,the fair value of the noncontrolling interest was equal to 25 percent of the book value of Shane. -Based on the preceding information,what amount will be reported in the consolidated cash flow statement as net cash provided by operating activities for 20X9?

Tower Corporation's controller has just finished preparing a consolidated balance sheet,income statement,and statement of changes in retained earnings for the year ended December 31,20X9.Tower owns 80 percent of Network Corporation's stock,which it acquired at underlying book value on November 1,20X6.At that date,the fair value of the noncontrolling interest was equal to 20 percent of Network Corporation's book value.The following information is available: Consolidated net income for 20X9 was $160,000. Network reported net income of $50,000 for 20X9. Tower paid dividends of $30,000 in 20X9. Network paid dividends of $10,000 in 20X9. Tower issued common stock on February,18,20X9,for a total of $100,000. Consolidated wages payable decreased by $6,000 in 20X9. Consolidated depreciation expense for the year was $15,000. Consolidated accounts receivable decreased by $20,000 in 20X9. Bonds payable of Tower with a book value of $102,000 were retired for $100,000 on December 31,20X9. Consolidated amortization expense on patents was $10,000 for 20X9. Tower sold land that it had purchased for $75,000 to a nonaffiliate for $80,000 on June 10,20X9. Consolidated accounts payable decreased by $7,000 during 20X9. Total purchases of equipment by Tower and Network during 20X9 were $180,000. Consolidated inventory increased by $36,000 during 20X9. There were no intercompany transfers between Tower and Network in 20X9 or prior years except for Network's payment of dividends.Tower uses the indirect method in preparing its cash flow statement. -Based on the preceding information,what was the change in cash balance for the consolidated entity for 20X9?

Denver Corporation owns 25 percent of the voting shares of Alamos Corporation.In 20X8,Alamos reported net income of $120,000 and paid dividends of $30,000.Denver uses the equity method to account for this investment.Denver reported taxable income of $160,000 on its separate operations and has an effective tax rate of 40 percent.There is an 80 percent exemption on intercompany dividends. -Based on the preceding information,income taxes payable for Denver for the year 20X8 will be:

On January 1,20X8,Gulfstream Corporation acquired 40 percent of the voting shares of Hunter Company for $65,000.Hunter reported net income of $45,000 and paid dividends of $10,000 in 2008.Gulfstream reported operating income of $50,000 for the year.There is 80 percent exemption of intercompany dividends and the effective tax rate is 35 percent.Assume that the equity method is being used. -Based on the preceding information,what would Gulfstream report as income tax expense for the year?

New Life Corporation has just finished preparing a consolidated balance sheet,income statement,and statement of changes in retained earnings for 20X9.The following items are proposed for inclusion in the consolidated cash flow statement: New Life holds 75 percent of the voting stock of Shane Pharmaceuticals,acquired at book value on June 21,20X6.On the date of the acquisition,the fair value of the noncontrolling interest was equal to 25 percent of the book value of Shane. -Based on the preceding information,what was the change in cash balance for the consolidated entity for 20X9?

On July 1,20X8,Fair Logic Corporation acquires 75 percent of Integrated Systems Inc.common stock for its underlying book value.At the time of acquisition,the fair value of the noncontrolling interest is equal to its proportionate share of book value of Integrated Systems.On January 1,20X8 Integrated reported common stock of $100,000 and retained earnings of $130,000.For the year 20X8,Integrated reports the following items: Fair Logic uses the equity method in accounting for this investment. -Based on the preceding information,what is the book value of shares acquired by Fair Logic on July 1,20X8?

Power Corporation owns 75 percent of Transmitter Company's common stock.At the date of acquisition the fair value of the noncontrolling interest was equal to the book value of Transmitter Company's common stock.The following balance sheet data are presented for December 31,20X8: Transmitter reported net income of $90,000 in 20X8 and paid dividends of $30,000.Its bonds have an annual interest rate of 10 percent and are convertible into 12,000 common shares.Its preferred shares pay a 12 percent annual dividend and convert into 5,000 shares of common stock.In addition,Transmitter has warrants outstanding for 12,000 shares of common stock at $15 per share.The 20X8 average price of Transmitter common shares was $25. Power reported income of $180,000 from its own operations for 20X8 and paid dividends of $40,000.Its 9 percent bonds convert into 8,000 shares of its common stock.The companies file separate tax returns and are subject to income taxes of 40 percent. Required: Compute basic and diluted earnings per share for the consolidated entity for 20X8.

Company A owns 85 percent of Company B's stock and 80 percent of Company C's stock.All acquisitions were made at book value.The fair values of noncontrolling interests at the time of acquisition were equal to the proportionate share of the book values of the companies.The companies file a consolidated tax return each year and in 20X9 paid a total tax of $112,000.Each company is involved in a number of intercompany inventory transfers each period.Information on the companies' activities for 20X9 is as follows: Company A does not record income tax expense on income from subsidiaries because a consolidated tax return is filed. -Based on the information provided,what amount of income tax expense should be assigned to Company C?

On July 1,20X8,Fair Logic Corporation acquires 75 percent of Integrated Systems Inc.common stock for its underlying book value.At the time of acquisition,the fair value of the noncontrolling interest is equal to its proportionate share of book value of Integrated Systems.On January 1,20X8 Integrated reported common stock of $100,000 and retained earnings of $130,000.For the year 20X8,Integrated reports the following items: Fair Logic uses the equity method in accounting for this investment. -Based on the preceding information,what journal entry would Fair Logic make to record equity method income for the year?

Tower Corporation's controller has just finished preparing a consolidated balance sheet,income statement,and statement of changes in retained earnings for the year ended December 31,20X9.Tower owns 80 percent of Network Corporation's stock,which it acquired at underlying book value on November 1,20X6.At that date,the fair value of the noncontrolling interest was equal to 20 percent of Network Corporation's book value.The following information is available: Consolidated net income for 20X9 was $160,000. Network reported net income of $50,000 for 20X9. Tower paid dividends of $30,000 in 20X9. Network paid dividends of $10,000 in 20X9. Tower issued common stock on February,18,20X9,for a total of $100,000. Consolidated wages payable decreased by $6,000 in 20X9. Consolidated depreciation expense for the year was $15,000. Consolidated accounts receivable decreased by $20,000 in 20X9. Bonds payable of Tower with a book value of $102,000 were retired for $100,000 on December 31,20X9. Consolidated amortization expense on patents was $10,000 for 20X9. Tower sold land that it had purchased for $75,000 to a nonaffiliate for $80,000 on June 10,20X9. Consolidated accounts payable decreased by $7,000 during 20X9. Total purchases of equipment by Tower and Network during 20X9 were $180,000. Consolidated inventory increased by $36,000 during 20X9. There were no intercompany transfers between Tower and Network in 20X9 or prior years except for Network's payment of dividends.Tower uses the indirect method in preparing its cash flow statement. -Based on the preceding information,what amount will be reported in the consolidated cash flow statement as net cash used in financing activities for 20X9?

Jupiter Corporation's consolidated cash flow statement for the year ended December 31,20X8,reported operating cash inflows of $160,000,financing cash outflows of $90,000,and investing cash outflows $55,000,and an ending cash balance of $75,000.Jupiter acquired 75 percent of Ganymede Company's common stock on July 1,20X6,at book value.At that date,the fair value of the noncontrolling interest was equal to 25 percent of Ganymede Company's book value.Ganymede reported net income of $20,000,paid dividends of $8,000 in 20X8,and is included in Jupiter's consolidated statements.Jupiter paid dividends of $25,000 in 20X8.The indirect method is used in computing cash flow from operations. -Based on the information provided,what was the consolidated cash balance at January 1,20X8?

Company A owns 85 percent of Company B's stock and 80 percent of Company C's stock.All acquisitions were made at book value.The fair values of noncontrolling interests at the time of acquisition were equal to the proportionate share of the book values of the companies.The companies file a consolidated tax return each year and in 20X9 paid a total tax of $112,000.Each company is involved in a number of intercompany inventory transfers each period.Information on the companies' activities for 20X9 is as follows: Company A does not record income tax expense on income from subsidiaries because a consolidated tax return is filed. -Based on the information provided,income to the controlling interest for 20X9 is:

Boycott Company holds 75 percent ownership of Fred Corporation.The consolidated balance sheets as of December 31,2008,and December 31,2009,are as follows: The 2009 consolidated income statement contained the following amounts: Boycott acquired its investment in Fred on January 1,2006,for $120,000.At that date,the fair value of the noncontrolling interest was $40,000,and Fred reported net assets of $130,000.A total of $20,000 of the differential was assigned to goodwill.The remainder of the differential was assigned to equipment with a remaining life of 10 years from the date of combination. Boycott sold $100,000 of bonds on December 31,2009,to assist in generating additional funds.Fred reported net income of $20,000 for 2009 and paid dividends of $10,000.Boycott reported 2009 equity-method net income of $75,000 paid dividends of $20,000 for the year. Required: 1)Prepare a worksheet to develop a consolidated statement of cash flows for 2009 using the indirect method of computing cash flows from operations. 2)Prepare a consolidated statement of cash flows for 2009.