Exam 8: Changes in Ownership Interest

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?

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:

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.The amount of the gain on sale of the 2,000 shares that should be recorded on the books of Pharma Company is:

P Company purchased 96,000 shares of the common stock of S Company for $1,200,000 on January 1,2013,when S's stockholders' equity consisted of $5 par value,Common Stock at $600,000 and Retained Earnings of $800,000.The difference between cost and book value relates to goodwill. On January 2,2016,S Company purchased 20,000 of its own shares from noncontrolling interests for cash of $300,000 to be held as treasury stock.S Company's retained earnings had increased to $1,000,000 by January 2,2016.S Company uses the cost method in regards to its treasury stock and P Company uses the equity method to account for its investment in S Company. Required: Prepare all determinable workpaper entries for the preparation of consolidated statements on December 31,2016.

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

Pratt Company purchased 40,000 shares of Silas Company's common stock for $860,000 on January 1,2016.At that time Silas Company had $500,000 of $10 par value common stock and $300,000 of retained earnings.Silas Company's income earned and increase in retained earnings during 2016 and 2017 were: Silas Company income is earned evenly throughout the year. On September 1,2017,Pratt Company sold on the open market,12,000 shares of its Silas Company stock for $460,000.Any difference between cost and book value relates to Silas Company land.Pratt Company uses the cost method to account for its investment in Silas Company. Required: A.Compute Pratt Company's reported gain (loss)on the sale. B.Prepare all consolidated statements workpaper eliminating entries for a workpaper on December 31,2017.

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?

A parent company's equity interest in a subsidiary may change as the result of the issuance of additional shares of stock by the subsidiary.Describe the effect on the parent's investment account when the new shares are (a)purchased ratably by the parent and noncontrolling shareholders or (b)entirely by the noncontrolling shareholders.

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 would be the balance in the Investment of S Corporation account on December 31,2016?

Partner Company acquired 85% of the common stock of Simplex Company in two separate cash transactions.The first purchase of 108,000 shares (60%)on January 1,2015,cost $735,000.The second purchase,one year later,of 45,000 shares (25%)cost $330,000.Simplex Company's stockholders' equity was as follows: On April 1,2016,after a significant rise in the market price of Simplex Company's stock,Partner Company sold 32,400 of its Simplex Company shares for $390,000.Simplex Company notified Partner Company that its net income for the first three months was $22,000.The shares sold were identified as those obtained in the first purchase.Any difference between cost and book value relates to goodwill.Partner uses the partial equity method to account for its investment in Simplex Company. Required: A.Prepare the journal entries Partner Company will make on its books during 2015 and 2016 to account for its investment in Simplex Company. B.Prepare the workpaper eliminating entries needed for a consolidated statements workpaper on December 31,2016.

Which one of the following statements regarding IFRS and accounting for step acquisitions is most correct?

On January 1,2012,Panda Company purchased 16,000 of the 20,000 outstanding common shares of Simian Company for $760,000.On January 1,2016,Panda Company sold 2,000 of its shares of Simian Company on the open market for $90 per share.Simian 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 Simian 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 workpaper for the preparation of consolidated statements on December 31,2016,would be: