Exam 8: Consolidated Cash Flows and Changes in Ownership

What is Hanson's ownership interest in Marvin after its January 1, 2019 purchase?

How much of the acquisition differential was allocated to equipment?

What would be the balance in Hanson's investment in Marvin account on December 31, 2019?

The trial balances of Ash Inc. and its subsidiary Cinder Corp. on December 31, 2018 are shown below: Ash Cinder Imventory \ 160,000 \ 100,000 Plant and Equipment (net) \ 2,700,000 \ 700,000 Dividends Declared \ 200,000 \ 100,000 Investment in Cinder \ 700,000 - Cost of Goods Sold \ 650,000 \ 90,000 Other Expenses \ 50,000 \ 10,000 Total Assets \ 4,460,000 \ 1,000,000 Liabilities \ 1,000,000 \ 150,000 Common Shares \ 1,660,000 \ 600,000 Retained Earnings \ 600,000 \ 100,000 Sales and Other Revenue \ 1,200,000 \ 150,000 Total Labilities and Equity \ 4,460,000 \ 1,000,000 Other Information: Ash acquired Cinder in three stages: January 1, 2015: Ash purchased 10,000 shares for \ 100,000. Cinder's Retained Earnings were \ 40,000 on that date. January 1, 2017: Ash purchased 30,000 shares for \ 450,000. Cinder's Retained Earnings were \ 80,000 on that date. December 31, 2018: Ash purchased 20,000 shares for \ 150,000. Cinder's Retained Earnings were \ 100,000 on that date. Cinder was incorporated on January 1, 2013. On that date, Cinder issued 100,000 voting shares. Any difference between the cost and book value is attributable entirely to trademarks, which are to be amortized over 5 years. The company has neither issued nor retired shares since the date of its incorporation. Ash sold depreciable assets to Cinder at a loss of $20,000 on January 1, 2017. These assets had a 10 year remaining life. Intercompany sales of inventory during 2018 amounted to $250,000. Unrealized inventory profits for each company are shown below for 2018. The amounts indicate the amount of profit in each company's inventory. Ash January 1, 2018: \ 10,000 December 31, 2018 \ 20,000 Cinder January 1, 2018: \ 20,000 December 31, 2018 \ 40,000 All inventories on hand at the start of 2018 were sold to outsiders during the year. The net Incomes of both companies are evenly earned throughout the year. Both companies are subject to an effective corporate tax rate of 20%. -Beta Corp. owns 80% of Gamma Corp. The Consolidated Financial Statements of Beta Corp. for 2018 and 2019 are shown below: Beta Corp. Consolidated Balance Sheet, December 31, 2019 Cash \ 180,000 \ 40,000 Accounts Receivable \ 300,000 \ 100,000 I muentory \ 400,000 \ 100,000 Land \ 160,000 \ 200,000 Plant and Equipment \ 1,650,000 \ 1,170,000 Accumulated Depreciation (\ 800,000) \ 770,000) Goodwill \ 60,000 \ 60,000 Total Assets \ 1,950,000 \ 900,000 Accounts Pay able \ 326,000 \ 40,000 Accrued Liabilities \ 350,000 \ 140,000 Bonds Payable \ 400,000 \ 100,000 Less Bond Discount \ 40,000) \ 50,000) Non-Controlling Interest \ 214,000 \ 200,000 Common Shares \ 350,000 \ 350,000 Retained Earnings \ 350,000 \ 120,000 Total Liabilities and Equity \ 1,950,000 \ 900,000 Beta Corp. Consolidated Income Statement, For the year ended December 31, 2019 Sales \ 500,000 Cost of aales Depreciation \ 115,000 Interest expense \ 30,000 Gain on land sale \ 50,000 \ 185,000) Net income \ 315,000 Attributable to: Shareholders of Parent \ 300,000 Non-Controlling Interest \ 15,000 Other Information: Beta purchased its interest in Gamma on January 1, 2015 for $360,000 when the company's net assets were valued at $300,000. The acquisition differential was allocated equally between goodwill and equipment, which was estimated to have a remaining useful life of ten years from the acquisition date. Gamma reported a net income of $75,000 and paid dividends of $5,000 during 2019. Beta issued $300,000 in bonds during the year. Beta reported an equity method net Income of $300,000 and paid $70,000 in dividends to its shareholders. Required: Prepare a Consolidated Statement of Cash Flows for Beta Corp. for 2019.

The trial balances of Ash Inc. and its subsidiary Cinder Corp. on December 31, 2018 are shown below: Ash Cinder Imventory \ 160,000 \ 100,000 Plant and Equipment (net) \ 2,700,000 \ 700,000 Dividends Declared \ 200,000 \ 100,000 Investment in Cinder \ 700,000 - Cost of Goods Sold \ 650,000 \ 90,000 Other Expenses \ 50,000 \ 10,000 Total Assets \ 4,460,000 \ 1,000,000 Liabilities \ 1,000,000 \ 150,000 Common Shares \ 1,660,000 \ 600,000 Retained Earnings \ 600,000 \ 100,000 Sales and Other Revenue \ 1,200,000 \ 150,000 Total Labilities and Equity \ 4,460,000 \ 1,000,000 Other Information: Ash acquired Cinder in three stages: January 1, 2015: Ash purchased 10,000 shares for \ 100,000. Cinder's Retained Earnings were \ 40,000 on that date. January 1, 2017: Ash purchased 30,000 shares for \ 450,000. Cinder's Retained Earnings were \ 80,000 on that date. December 31, 2018: Ash purchased 20,000 shares for \ 150,000. Cinder's Retained Earnings were \ 100,000 on that date. Cinder was incorporated on January 1, 2013. On that date, Cinder issued 100,000 voting shares. Any difference between the cost and book value is attributable entirely to trademarks, which are to be amortized over 5 years. The company has neither issued nor retired shares since the date of its incorporation. Ash sold depreciable assets to Cinder at a loss of $20,000 on January 1, 2017. These assets had a 10 year remaining life. Intercompany sales of inventory during 2018 amounted to $250,000. Unrealized inventory profits for each company are shown below for 2018. The amounts indicate the amount of profit in each company's inventory. Ash January 1, 2018: \ 10,000 December 31, 2018 \ 20,000 Cinder January 1, 2018: \ 20,000 December 31, 2018 \ 40,000 All inventories on hand at the start of 2018 were sold to outsiders during the year. The net Incomes of both companies are evenly earned throughout the year. Both companies are subject to an effective corporate tax rate of 20%. -Compute the Consolidated Cost of Goods Sold for 2018.

What is the Consolidated Net Income for the year attributable to the shareholders of A Inc.?

What is the amount of unamortized acquisition differential (including goodwill) after the sale?

Prepare a calculation of non-controlling interest as at December 31, 2017.

By how much would the non-controlling interest amount have changed as a result of the Hanson's second purchase?

Compute the Consolidated Net Income for 2017 and show its allocation between the controlling and non-controlling interests. Do not prepare an Income Statement.

Assuming that A acquired a controlling interest in B through numerous small acquisitions, what would be appropriate accounting with respect to these acquisitions?

The following information was derived from the 2017 consolidated financial statements of X Inc., which owns 80% of Y Inc. as well as 40% of Z Inc.: Equity Earnings from Z Inc. \ 120,000 Decrease in Accounts Payable \ 5,000 Increase in Accounts Receivable \ 10,000 Increase in Inventory \ 20,000 Increase in Bonds Payable \ 40,000 Depreciation \ 20,000 Loss on sale of machinery \ 10,000 Carrying value of machinery sold \ 60,000 Diwidends received from Z Inc. \ 10,000 Purchase of a building for cash \ 400,000 Goodwill impairment loss \ 5,000 Entity Net Inc ome allocated to non-controlling interes \ 5,000 Consolidated net income allocated to Parent \ 950,000 Diwidends paid by X Inc. \ 40,000 Diwidends paid by Y Inc. \ 12,000 The cash balance at the start of 2017 was $200,000. Required: Prepare the consolidated statement of cash flows for Lime Inc for the year ended December 31, 2017.

Which of the following is not included in the amount of shareholders' equity allocated to the holders of the preference shares on the consolidated balance sheet?

What is ABC's ownership interest in 123 after its sale?

Assume that X Corp. controls Y Corp., X constantly purchases and sells Y's voting shares on the open market while always ensuring that it maintains a controlling interest over Y. Which of the following statements pertaining to X buying and selling activity is correct?

What is the gain or loss on P's sale of its shares on Q Corp.?

On January 1, 2018, Philcorp acquired 8,000 of the outstanding 10,000 shares of Anderco by issuing its own shares with a market value of $400,000. On June 30, 2019, Anderco issued an additional 2,000 shares for cash consideration of $60 per share, none of which were acquired by Philcorp. Immediately before the issue, the shareholders' equity of Anderco amounted to $500,000 and the unamortized purchase discrepancy was $65,000. Philcorp uses the equity method to record its investment in Anderco. Required: What gain or loss will appear in the consolidated financial statements of Philcorp and its subsidiary Anderco as a result of this transaction?

If the shareholders' equity allocated to the subsidiary's preference shares amounts to $240,000 and the parent company acquires 60% of the subsidiary's preference shares at a cost of $150,000, what effect will the transaction have on consolidated shareholders' equity?

The trial balances of Ash Inc. and its subsidiary Cinder Corp. on December 31, 2018 are shown below: Ash Cinder Imventory \ 160,000 \ 100,000 Plant and Equipment (net) \ 2,700,000 \ 700,000 Dividends Declared \ 200,000 \ 100,000 Investment in Cinder \ 700,000 - Cost of Goods Sold \ 650,000 \ 90,000 Other Expenses \ 50,000 \ 10,000 Total Assets \ 4,460,000 \ 1,000,000 Liabilities \ 1,000,000 \ 150,000 Common Shares \ 1,660,000 \ 600,000 Retained Earnings \ 600,000 \ 100,000 Sales and Other Revenue \ 1,200,000 \ 150,000 Total Labilities and Equity \ 4,460,000 \ 1,000,000 Other Information: Ash acquired Cinder in three stages: January 1, 2015: Ash purchased 10,000 shares for \ 100,000. Cinder's Retained Earnings were \ 40,000 on that date. January 1, 2017: Ash purchased 30,000 shares for \ 450,000. Cinder's Retained Earnings were \ 80,000 on that date. December 31, 2018: Ash purchased 20,000 shares for \ 150,000. Cinder's Retained Earnings were \ 100,000 on that date. Cinder was incorporated on January 1, 2013. On that date, Cinder issued 100,000 voting shares. Any difference between the cost and book value is attributable entirely to trademarks, which are to be amortized over 5 years. The company has neither issued nor retired shares since the date of its incorporation. Ash sold depreciable assets to Cinder at a loss of $20,000 on January 1, 2017. These assets had a 10 year remaining life. Intercompany sales of inventory during 2018 amounted to $250,000. Unrealized inventory profits for each company are shown below for 2018. The amounts indicate the amount of profit in each company's inventory. Ash January 1, 2018: \ 10,000 December 31, 2018 \ 20,000 Cinder January 1, 2018: \ 20,000 December 31, 2018 \ 40,000 All inventories on hand at the start of 2018 were sold to outsiders during the year. The net Incomes of both companies are evenly earned throughout the year. Both companies are subject to an effective corporate tax rate of 20%. -What amount will be shown in the consolidated balance sheet of Ash as at December 31, 2018, for trademarks?

Which of the following statements pertaining to preferred shares is correct?