Question
a. Disaggregate and document the activity for the 100% Acquisition Accounting Premium (AAP), the controlling interest AAP and the noncontrolling interest AAP. Do not use
a. Disaggregate and document the activity for the 100% Acquisition Accounting Premium (AAP), the controlling interest AAP and the noncontrolling interest AAP.
Do not use negative signs with any of your answers in part a.
Unamortized | Unamortized | Unamortized | Unamortized | Unamortized | Unamortized | Unamortized | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
AAP | 2008 | AAP | 2009 | AAP | 2010 | AAP | 2011 | AAP | 2012 | AAP | 2013 | AAP | |||||
1/1/2008 | Amortization | 1/1/2009 | Amortization | 1/1/2010 | Amortization | 1/1/2011 | Amortization | 1/1/2012 | Amortization | 1/1/2013 | Amortization | 1/1/2014 | |||||
Royalty agreement | Answer | Answer | Answer | Answer | Answer | Answer | Answer | Answer | Answer | Answer | Answer | Answer | Answer | ||||
Controlling interest: | |||||||||||||||||
Royalty agreement | Answer | Answer | Answer | Answer | Answer | Answer | Answer | Answer | Answer | Answer | Answer | Answer | Answer | ||||
Noncontrolling interest: | |||||||||||||||||
Royalty agreement | Answer | Answer | Answer | Answer | Answer | Answer | Answer | Answer | Answer | Answer | Answer | Answer | Answer |
b. Calculate and organize the profits and losses on intercompany transactions and balances.
Use a negative signs with answers that are reductions.
Downstream | Upstream | ||
---|---|---|---|
AnswerDeferred intercompany profit recognized during 2013Net intercompany profit deferred at 1/1/13Net intercompany profit deferred at 12/31/13 | Answer | Answer | |
Less: | AnswerDeferred intercompany profit recognized during 2013Net intercompany profit deferred at 1/1/13Net intercompany profit deferred at 12/31/13 | Answer | Answer |
AnswerDeferred intercompany profit recognized during 2013Net intercompany profit deferred at 1/1/13Net intercompany profit deferred at 12/31/13 | Answer | Answer |
c. Compute the pre-consolidation Equity Investment account beginning and ending balances starting with the stockholders' equity of the subsidiary.
Use negative signs with answers that are deductions.
Equity investment at 1/1/13: | ||
Common stock | Answer | |
APIC | Answer | |
Retained earnings | Answer | |
AnswerCommon stockAPICRetained earningsUnamortized AAP75% of upstream deferred intercompany profits25% of upstream deferred intercompany profits | Answer | |
Less: | AnswerCommon stockAPICRetained earningsUnamortized AAP75% of upstream deferred intercompany profits25% of upstream deferred intercompany profits | Answer |
Answer | ||
Equity investment at 12/31/13: | ||
Common stock | Answer | |
APIC | Answer | |
Retained earnings | Answer | |
AnswerCommon stockAPICRetained earningsUnamortized AAP75% of upstream deferred intercompany profits25% of upstream deferred intercompany profits | Answer | |
Less: | AnswerCommon stockAPICRetained earningsUnamortized AAP75% of upstream deferred intercompany profits25% of upstream deferred intercompany profits | Answer |
Answer |
d. Reconstruct the activity in the parent's pre-consolidation Equity Investment T-account for the year of consolidation.
Equity Investment | |||
---|---|---|---|
Balance at 1/1/13 | Answer | Answer | |
Net income | Answer | Answer | Dividends |
AnswerNet incomeUpstream equipment profitsDividendsAAP amortization | Answer | Answer | AnswerNet incomeUpstream equipment profitsDividendsAAP amortization |
Balance at 12/31/13 | Answer | Answer |
e. Independently compute the owners' equity attributable to the noncontrolling interest beginning and ending balances starting with the owners' equity of the subsidiary.
Use negative signs with answers that are reductions.
Noncontrolling interest at 1/1/13: | ||
Common stock | Answer | |
APIC | Answer | |
Retained earnings | Answer | |
AnswerCommon stockAPICRetained earningsUnamortized AAP75% of upstream deferred intercompany profits25% of upstream deferred intercompany profits | Answer | |
Less: | AnswerCommon stockAPICRetained earningsUnamortized AAP75% of upstream deferred intercompany profits25% of upstream deferred intercompany profits | Answer |
Answer | ||
Noncontrolling interest at 12/31/13: | ||
Common stock | Answer | |
APIC | Answer | |
Retained earnings | Answer | |
AnswerCommon stockAPICRetained earningsUnamortized AAP75% of upstream deferred intercompany profits25% of upstream deferred intercompany profits | Answer | |
Less: | AnswerCommon stockAPICRetained earningsUnamortized AAP75% of upstream deferred intercompany profits25% of upstream deferred intercompany profits | Answer |
Answer |
f. Independently calculate consolidated net income, controlling interest net income and noncontrolling interest net income.
Use negative signs with answers that are reductions.
Consolidated: | ||
Parent's stand-alone net income | Answer | |
Subsidiary's stand-alone net income | Answer | |
Plus: | Answer100% realized upstream deferred profits75% realized upstream deferred profits25% realized upstream deferred profits100% AAP amortization75% AAP amortization25% AAP amortization | Answer |
Less: | Answer100% realized upstream deferred profits75% realized upstream deferred profits25% realized upstream deferred profits100% AAP amortization75% AAP amortization25% AAP amortization | Answer |
Subsidiary's adjusted stand-alone net income | Answer | |
Consolidated net income | Answer | |
Parent: | ||
Parent's stand-alone net income | Answer | |
75% Subsidiary's stand-alone net income | Answer | |
Plus: | Answer100% realized upstream deferred profits75% realized upstream deferred profits25% realized upstream deferred profits100% AAP amortization75% AAP amortization25% AAP amortization | Answer |
Less: | Answer100% realized upstream deferred profits75% realized upstream deferred profits25% realized upstream deferred profits100% AAP amortization75% AAP amortization25% AAP amortization | Answer |
75% of subsidiary's stand-alone net income | Answer | |
Consolidated net income attributable to the parent | Answer | |
Subsidiary: | ||
25% of subsidiary's stand-alone net income | Answer | |
Plus: | Answer100% realized upstream deferred profits75% realized upstream deferred profits25% realized upstream deferred profits100% AAP amortization75% AAP amortization25% AAP amortization | Answer |
Less: | Answer100% realized upstream deferred profits75% realized upstream deferred profits25% realized upstream deferred profits100% AAP amortization75% AAP amortization25% AAP amortization | Answer |
Answer |
g. Complete the consolidating entries according to the C-E-A-D-I sequence and complete the consolidation worksheet.
Consolidation Worksheet | |||
---|---|---|---|
Description | Debit | Credit | |
[C] | Equity income | Answer | Answer |
AnswerPPE, netRoyalty agreementEquity incomeConsolidated net income attributable to noncontrolling interestDividendsEquity investmentNoncontrolling interestRetained earningsOperating expensesDepreciation expense | Answer | Answer | |
Dividends | Answer | Answer | |
Equity investment | Answer | Answer | |
AnswerPPE, netRoyalty agreementEquity incomeConsolidated net income attributable to noncontrolling interestDividendsEquity investmentNoncontrolling interestRetained earningsOperating expensesDepreciation expense | Answer | Answer | |
[E] | Common stock | Answer | Answer |
APIC | Answer | Answer | |
AnswerPPE, netRoyalty agreementEquity incomeConsolidated net income attributable to noncontrolling interestDividendsEquity investmentNoncontrolling interestRetained earningsOperating expensesDepreciation expense | Answer | Answer | |
Equity investment | Answer | Answer | |
AnswerPPE, netRoyalty agreementEquity incomeConsolidated net income attributable to noncontrolling interestDividendsEquity investmentNoncontrolling interestRetained earningsOperating expensesDepreciation expense | Answer | Answer | |
[A] | AnswerPPE, netRoyalty agreementEquity incomeConsolidated net income attributable to noncontrolling interestDividendsEquity investmentNoncontrolling interestRetained earningsOperating expensesDepreciation expense | Answer | Answer |
Equity investment | Answer | Answer | |
AnswerPPE, netRoyalty agreementEquity incomeConsolidated net income attributable to noncontrolling interestDividendsEquity investmentNoncontrolling interestRetained earningsOperating expensesDepreciation expense | Answer | Answer | |
[D] | AnswerPPE, netRoyalty agreementEquity incomeConsolidated net income attributable to noncontrolling interestDividendsEquity investmentNoncontrolling interestRetained earningsOperating expensesDepreciation expense | Answer | Answer |
AnswerPPE, netRoyalty agreementEquity incomeConsolidated net income attributable to noncontrolling interestDividendsEquity investmentNoncontrolling interestRetained earningsOperating expensesDepreciation expense | Answer | Answer | |
[Igain] | Equity investment | Answer | Answer |
AnswerPPE, netRoyalty agreementEquity incomeConsolidated net income attributable to noncontrolling interestDividendsEquity investmentNoncontrolling interestRetained earningsOperating expensesDepreciation expense | Answer | Answer | |
AnswerPPE, netRoyalty agreementEquity incomeConsolidated net income attributable to noncontrolling interestDividendsEquity investmentNoncontrolling interestRetained earningsOperating expensesDepreciation expense | Answer | Answer | |
[Idep] | AnswerPPE, netRoyalty agreementEquity incomeConsolidated net income attributable to noncontrolling interestDividendsEquity investmentNoncontrolling interestRetained earningsOperating expensesDepreciation expense | Answer | Answer |
AnswerPPE, netRoyalty agreementEquity incomeConsolidated net income attributable to noncontrolling interestDividendsEquity investmentNoncontrolling interestRetained earningsOperating expensesDepreciation expense | Answer | Answer |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started