Question
1) Under the equity method, if the subsidiary company reports a loss, then the journal entry in the books of the parent company to record
1)
Under the equity method, if the subsidiary company reports a loss, then the journal entry in the books of the parent company to record the loss will be
Debit Cash, credit Investment in S
| ||
Debit Income from S, credit Investment in S
| ||
Debit Cash, credit Income from S | ||
Debit Investment in S, credit Income from S |
2)
P acquired 75% shares of S on Jan 1, 2018 for $120,000. On that date P reported common stock of $200,000 and retained earnings of $100,000. On that date, S reported common stock of $100,000 and retained earnings of $60,000. The fair value of the non-controlling interest is $40,000.
What is the total of the common stock + retained earnings that will be reported in the consolidated balance sheet prepared on Jan 1, 2018?
$220,000
| ||
$460,000
| ||
$60,000 | ||
$300,000
|
3)
P acquired 75% shares of S on Jan 1, 2018 for $150,000. On that date S reported a common stock of $100,000 and retained earnings of $60,000. All assets have of S have a fair value equal to the book. During 2018, S reported a net income of $80,000 and paid dividend of $20,000. On Dec 31, 2018, in the Consolidation Entry to close the common stock and retained earnings of the subsidiary, the retained earnings account will be debited with how much amount? Hint: Here you need to calculate the ending balance of retained earnings S.
$116,000 | ||
$120,000
| ||
$60,000
| ||
$90,000 |
4)
P acquired 100% shares of S on Jan 1, 2018 for $200,000. On that date S reported a common stock of $100,000 and retained earnings of $60,000. All assets have of S have a fair value equal to the book value except for equipment that has a fair value of 40,000 above the books value. This equipment has a remaining useful life of 10 years. During 2018, S reported a net income of $80,000 and paid dividend of $20,000.
In the following Consolidation Entry on December 31 2018, to close the common stock and retained earnings of S, what amount will be credited to the Investment in S account? (Hint: in this you must also calculate the ending balance of RE of Company S on Dec 31, 2018)
Common Stock XXX
Retained Earnings XXX
Investment in S Account XXX
$55,000
| ||
$0
| ||
$220,000
| ||
$60,000 |
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