Exam 10: Additional Consolidation Reporting Issues

Flyer Corporation holds 90 percent of Kite Company's common shares but none of its preferred shares.On the date of acquisition,the fair value of the noncontrolling interest was equal to 10 percent of the book value of Kite Company.Summary balance sheets for the companies on December 31,20X8,are as follows: Flyer's preferred pays a 8 percent annual dividend,and Kite's preferred pays a 10 percent dividend.Kite's preferred shares can be converted into 20,000 shares of common stock at any time.Kite reported net income of $35,000 and paid a total of $10,000 of dividends in 20X8.Flyer reported income from its separate operations of $80,000 and paid total dividends of $25,000 in 20X8. -Based on the information provided,what is the diluted earnings per share for the consolidated entity for 20X8?

Dividends paid to noncontrolling shareholders: I.are reported as a cash outflow in the consolidated cash flow statement. II.represent funds that are no longer available to the consolidated entity. III.are reported in the consolidated retained earnings statement.

Company A holds 70 percent of the voting shares of Company B.During 20X8,Company B sold land with a book value of $125,000 to Company A for $150,000.Company A continues to hold the land at the end of the year.The companies file separate tax returns and are subject to a 40 percent tax rate.Assume that Company A uses the fully adjusted equity method in accounting for its investment in Company B. -Assume the Company A holds the land at the end of 20X9.Based on the information given,the eliminating entry relating to the intercorporate sale of land to be entered in the consolidation worksheet prepared at the end of 20X9 will include:

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 tax expense for Denver for the year 20X8 will be:

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 investing activities for 20X9?

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 received from customers during the year?

On December 31,20X7,Planet Corporation acquired 80 percent of Broadway Company's stock,at underlying book value.At that date,the fair value of the noncontrolling interest was equal to 20 percent of the book value of Broadway Company.The two companies' balance sheets on December 31,20X9,are as follows: On December 31,20X9,Planet holds inventory purchased from Broadway for $40,000.Broadway's cost of producing the merchandise was $25,000.Broadway's ending inventory also contains $30,000 of purchases from Planet that had cost it $20,000 to produce. On December 30,20X9,Broadway sold equipment to Planet for $40,000.Broadway had purchased the equipment for $60,000 several years earlier.At the time of sale to Planet,the equipment had a book value of $20,000.The two companies file separate tax returns and are subject to a 40 percent tax rate.Planet does not record tax expense on its share of Broadway's undistributed earnings. Required: 1)Prepare the eliminating entries necessary to complete a consolidated balance sheet worksheet as of December 31,20X9. 2)Complete a consolidated balance sheet worksheet as of December 31,20X9.