Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

On January 1, Year 1, Entity A acquired 70 % of Entity B's voting interests for $87,500. The carrving amount of Entity B s assets

image text in transcribed
On January 1, Year 1, Entity A acquired 70 % of Entity B's voting interests for $87,500. The carrving amount of Entity B s assets and liabilities on that date equals their fair values. The noncontrolling interest (NC) is measured at its fair value of $37,500. 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. The trial balances on December 31, Year 1, of Entity A and Entity B before consolidation are presented below. Entity A $ 79,000 27,000 Entity B $ 125,000 35,000 61,000 Account Cash Trade receivables 33,000 Inventories 24,000 Current investments 50,000 106,000 PPE (net) 100,000 Investment in Entity B (55,000) (62,000) (27,000) (43,000) (90,000) (33,000) Trade payables Liability for employee benefits Noncurrent loans payable Common stock (40,000) (21,000) (78,000) (120,000) 61,000 Additional paid-in capital (37,000) Retained earnings January 1, Year 1 (55,000) (150,000) Net sales Cost of sales 50,000 General and administrative expenses 17,000 8,000 4,000 6,000 (28,000) Interest expense Dividend income received from Entity B 6,000 7,000 Income tax expense 40,000 Dividends declared and paid Additional information: In its separate financial statements, Entity A accounts for its investment in the subsidiary (Entity B) according to the cost model [we call it Initial Value Method ]. 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 $27,000 This item is in Entity B's inventory at year end. Note: To simplify the simulation, items of other comprehensive income are not included. Enter the amount of each line item in the year-end consolidated balance sheet in the shaded cells below. Indicate negative numbers by using a leading minus (-) sign. 1. Trade receivables [2 points] 2. Trade payables [1 point] 3. Inventories [4 points] 4. Equity attributable to the parent [10 points] 5. Noncontrolling interest [3 points]

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Funny Audit Stories Auditor Stories To Make You Laugh Out Loud

Authors: Truman Ballas

1st Edition

B097DCG5GS, 979-8524946072

More Books

Students also viewed these Accounting questions

Question

Presentation Aids Practicing Your Speech?

Answered: 1 week ago