Exam 3: The Reporting Entity and Consolidation of Less-Than-Wholly-Owned Subsidiaries With No Differential

On January 3, 20X9, Redding Company acquired 80 percent of Frazer Corporation's common stock for $344,000 in cash. At the acquisition date, the book values and fair values of Frazer's assets and liabilities were equal, and the fair value of the noncontrolling interest was equal to 20 percent of the total book value of Frazer. The stockholders' equity accounts of the two companies at the acquisition date are: Noncontrolling interest was assigned income of $11,000 in Redding's consolidated income statement for 20X9. -Based on the preceding information, what will be the amount of net income reported by Frazer Corporation in 20X9?

On January 1, 20X8, Wilhelm Corporation acquired 90 percent of Kaiser Company's voting stock, at underlying book value. The fair value of the noncontrolling interest was equal to 10 percent of the book value of Kaiser at that date. Wilhelm uses the equity method in accounting for its ownership of Kaiser. On December 31, 20X9, the trial balances of the two companies are as follows: -Based on the preceding information, what amount would be reported as total stockholder's equity in the consolidated balance sheet at December 31, 20X9?

Princeton Company acquired 75 percent of the common stock of Sheffield Corporation on December 31, 20X9. On the date of acquisition, Princeton held land with a book value of $150,000 and a fair value of $300,000; Sheffield held land with a book value of $100,000 and fair value of $500,000. Using the entity theory, at what amount would land be reported in a consolidated balance sheet prepared immediately after the combination?

Quid Corporation acquired 60 percent of Pro Company's common stock on December 31, 20X4. Goodwill (attributable to Quid's acquisition of Pro shares) of $150,000 was calculated under the proprietary theory approach. What is the amount of goodwill that should be reported under entity theory approach?

When a primary beneficiary's consolidation of a variable interest entity (VIE) is appropriate, the amounts of the VIE to be consolidated are: I. Book values for assets and liabilities transferred by the primary beneficiary. II. Fair values when the primary beneficiary relationship became established.

In reading a set of consolidated financial statements you are surprised to see the term noncontrolling interest not reported under the Liability section of the Balance Sheet. Required: a. What is a non-controlling interest? b. Why must it be reported in the financial statements as an element of equity rather than a liability?

Consolidated financial statements tend to be most useful for:

The FASB issued Interpretation No. 46 R related to the Consolidation of Variable Interest Entities. Describe what a Variable Interest Entity is and discuss why the FASB has difficulty in prescribing when these entities are consolidated?

On January 1, 20X8, Wilhelm Corporation acquired 90 percent of Kaiser Company's voting stock, at underlying book value. The fair value of the noncontrolling interest was equal to 10 percent of the book value of Kaiser at that date. Wilhelm uses the equity method in accounting for its ownership of Kaiser. On December 31, 20X9, the trial balances of the two companies are as follows: -Based on the preceding information, what amount would be reported as income to controlling interest in the consolidated financial statements for 20X9?

Parent Company acquired 90% of Son Inc. on January 31, 20X2 in exchange for cash. The book value of Son's individual assets and liabilities approximated their acquisition-date fair values. On the date of acquisition, Son reported the following: During the year Son Inc. reported $310,000 in net income and declared $15,000 in dividends. Parent Company reported $520,000 in net income and declared $25,000 in dividends. Parent accounts for their investment using the equity method. Required: 1. What journal entry will Parent make on the date of acquisition to record the investment in Son Inc.? 2. If Parent were to prepare a consolidated balance sheet on the acquisition date (January 31, 20X2), what is the basic elimination entry Parent would use in the consolidation worksheet? 3. What is Parent's balance in "Investment in Son Inc." prior to consolidation on December 31, 20X2? 4. What is the basic elimination entry Parent would use in the consolidation worksheet on December 31, 20X2?

On January 1, 20X9, Heathcliff Corporation acquired 80 percent of Garfield Corporation's voting common stock. Garfield's buildings and equipment had a book value of $300,000 and a fair value of $350,000 at the time of acquisition. -Based on the preceding information, what will be the amount at which Garfield's buildings and equipment will be reported in consolidated statements using the current accounting practice?

All of the following statements accurately describe Special Purpose Entities (SPEs) except for:

On January 1, 20X8, Gregory Corporation acquired 90 percent of Nova Company's voting stock, at underlying book value. The fair value of the noncontrolling interest was equal to 10 percent of the book value of Nova at that date. Gregory uses the equity method in accounting for its ownership of Nova. On December 31, 20X9, the trial balances of the two companies are as follows: Required: 1) Give all eliminating entries required on December 31, 20X8, to prepare consolidated financial statements. 2) Prepare a three-part consolidation worksheet as of December 31, 20X8.

Small-Town Retail owns 70 percent of Supplier Corporation's common stock. For the current financial year, Small-Town and Supplier reported sales of $450,000 and $300,000 and expenses of $290,000 and $240,000, respectively. -Based on the preceding information, what is the amount of net income to be reported in the consolidated income statement for the year under the proprietary theory approach?

Under FASB 141R, consolidation follows largely which theory approach?

On January 1, 20X8, Wilhelm Corporation acquired 90 percent of Kaiser Company's voting stock, at underlying book value. The fair value of the noncontrolling interest was equal to 10 percent of the book value of Kaiser at that date. Wilhelm uses the equity method in accounting for its ownership of Kaiser. On December 31, 20X9, the trial balances of the two companies are as follows: -Based on the preceding information, what amount would be reported as total liabilities in the consolidated balance sheet at December 31, 20X9?

On January 3, 20X9, Redding Company acquired 80 percent of Frazer Corporation's common stock for $344,000 in cash. At the acquisition date, the book values and fair values of Frazer's assets and liabilities were equal, and the fair value of the noncontrolling interest was equal to 20 percent of the total book value of Frazer. The stockholders' equity accounts of the two companies at the acquisition date are: Noncontrolling interest was assigned income of $11,000 in Redding's consolidated income statement for 20X9. -Based on the preceding information, what amount will be assigned to the noncontrolling interest on January 3, 20X9, in the consolidated balance sheet?

On January 1, 20X9, Gold Rush Company acquires 80 percent ownership in California Corporation for $200,000. The fair value of the noncontrolling interest at that time is determined to be $50,000. It reports net assets with a book value of $200,000 and fair value of $230,000. Gold Rush Company reports net assets with a book value of $600,000 and a fair value of $650,000 at that time, excluding its investment in California. What will be the amount of goodwill that would be reported immediately after the combination under current accounting practice?

On January 3, 20X9, Jane Company acquired 75 percent of Miller Company's outstanding common stock for cash. The fair value of the noncontrolling interest was equal to a proportionate share of the book value of Miller Company's net assets at the date of acquisition. Selected balance sheet data at December 31, 20X9, are as follows: -Based on the preceding information, what amount should be reported as noncontrolling interest in net assets in Jane Company's December 31, 20X9, consolidated balance sheet?