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On January 1, Year 1, Entity A acquired 60% of Entity B's voting interests for $100,000. The carrying amount of Entity B's assets and liabilities
On January 1, Year 1, Entity A acquired 60% of Entity B's voting interests for $100,000. The carrying amount of Entity B's assets and liabilities on that date equals their fair values. The noncontrolling interest (NCI) is measured at its fair value of $50,000. Entity A and Entity B use the same accounting principles, and no consolidating adjustments need to be made for intraentity transactions, etc., except as described below.
Account | Entity B | Entity A |
Cash | 124,000 | 69,000 |
Trade receivables | 36,000 | 29,000 |
Inventories | 63,000 | 34,000 |
Current investments | - | 24,000 |
PPE (net) | 106,000 | 50,000 |
Investment in Entity B | - | 100,000 |
Trade payables | (29,000) | (52,000) |
Liability for employee benefits | (43,000) | (62,000) |
Noncurrent loans payable | (90,000) | - |
Common stock | (33,000) | (40,000) |
Additional paid-in capital | (37,000) | (21,000) |
Retained earnings January 1, Year 1 | (55,000) | (78,000) |
Net sales | (150,000) | (120,000) |
Cost of sales | 50,000 | 61,000 |
General and administrative expenses | 8,000 | 17,000 |
Interest expense | 4,000 | 6,000 |
Dividend income received from Entity B | (24,000) | |
Income tax expense | 6,000 | 7,000 |
Dividends declared and paid | 40,000 | - |
- n its separate financial statements, Entity A accounts for its investment in the subsidiary (Entity B) according to the cost model. Thus, dividends from the subsidiary are recognized as income.
- During Year 1, Entity B distributed a cash dividend of $40,000.
- On December 31, Year 1, Entity A sold on credit an inventory item with a cost of $20,000 to Entity B for $28,000. This item is in Entity B's inventory at year end.
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Net sales Cost of sales Dividend income Net income Net income attributable to the NCI Net income attributable to the parent
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