Purchase Solution

Consolidation Workpaper at End of First Year of Ownership

Not what you're looking for?

Ask Custom Question

Please assist with the following problem. Thank you.

Power Corporation acquired 75 percent of Best Company's ownership on January 1, 20X8, for $96,000. At that date, the fair value of the non-controlling interest was $32,000. The book value of Best's net assets at acquisition was $100,000. The book values and fair values of Best's assets and liabilities were equal, except for Best's buildings and equipment, which were worth $20,000 more than book value. Buildings and equipment are depreciated on a 10-year basis.

Although goodwill is not amortized, the management of Power concluded at December 31, 20X8, that goodwill from its purchase of Best shares had been impaired and the correct carrying amount was $2,500. Goodwill and goodwill impairment were assigned proportionately to the controlling and non-controlling shareholders. (Note that Power Company does not adjust its Income from Subsidiary for goodwill impairment under the basic equity method.)

** Please see attachment for Trial balance data for Power and Best on December 31, 20X8. **

Required
a. Give all eliminating entries needed to prepare a three-part consolidation work paper as of December 31, 20X8.
b. Prepare a three-part consolidation work paper for 20X8 in good form.

Attachments
Purchase this Solution
Solution Summary

The consolidation workpaper at end of first year of ownership is examined.

Solution Preview

Hello

Please find the solution attached!
a. Eliminating entries:

E(1) Income from Subsidiary 16,500
Dividends Declared 12,000
Investment in Best Company Stock 4,500
Eliminate income from subsidiary.

E(2) Income to Noncontrolling Interest 6,000
Dividends Declared 4,000
Noncontrolling Interest 2,000
Assign income to noncontrolling interest.

E(3) Common Stock — Best Company 60,000
Retained Earnings, January 1 40,000
Differential 21,000
Investment in Best Company Stock 96,000
Noncontrolling Interest 25,000
Eliminate beginning investment balance.

E(4) Buildings and Equipment 15,000
Goodwill 6,000
Differential 21,000
Assign beginning differential.

E(5) Depreciation Expense 1,500
Accumulated Depreciation 1,500
Amortize ...

Solution provided by:
Manal Elkhoshkhany, MBA
Education
  • BA, Ain Shams University, Cairo Egypt
  • MBA, California State University, Sacramento
Recent Feedback
  • "ty i have more need help with"
  • "ty i have jmore i need help with"
  • "great help"
  • "excellent help"
  • "Very helpful and easy to understand."
Purchase this Solution
Free BrainMass Quizzes
Operations Management

This quiz tests a student's knowledge about Operations Management

Introduction to Finance

This quiz test introductory finance topics.

Marketing Management Philosophies Quiz

A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.

Employee Orientation

Test your knowledge of employee orientation with this fun and informative quiz. This quiz is meant for beginner and advanced students as well as professionals already working in the HR field.

Balance Sheet

The Fundamental Classified Balance Sheet. What to know to make it easy.

View More Free Quizzes
Related BrainMass Solutions

  • Consolidation / Eliminating entries

    P5-36 Consolidation Workpaper at End of First Year of Ownership Power Corporation acquired 75 percent of Best Company's ownership on January 1, 20X8, for $96,000.

  • Upstream and Downstream Sales & Multiple Stock Purchases

    The entry to establish reciprocity essentially takes the date of consolidation back to the date of P's first purchase of S stock.

  • Determining Eliminating Entries (Power Corporation)

    Power Corporation acquired 75 percent of Best Company's ownership on January 1, 20X8, for $96,000. At that date, the fair value of Best's buildings and equipment was $20,000 more than book value.

  • Financial Accounting - Consolidated Workpaper

    133550 Financial Accounting - Consolidated Workpaper A) Prepare a consolidation workpaper for 20X4 in good form. b) Prepare a consolidated balance sheet, income statement, and retained earnings statement for 20X4.

  • Transfer of Depreciable Asset at Beginning of Year

    This posting provides the workpaper eliminating entries needed, at the end of the two consecutive years, to remove the effects of intercompany sale.

  • consolidation procedures

    (See FASB FIN 35) The third method is the issuance of consolidation of financial statements at the end of the year. These statements show the parent and subsidiary as one single entity.

  • Lowe Corporation's Consolidation after One Year of Ownership

    177117 Lowe Corporation's Consolidation after One Year of Ownership Consolidation after One Year of Ownership Steadry Corporation purchased 80 percent of Lowe Corporation's stock on January 1, 20X2.

  • Consolidation

    Valuation of subsidiary accounts is based on the parent company's cost and specific subsidiary assets and liabilities are consolidated at the ownership percentage of their fair market values. 2.

  • Determine parent's financial records subsequent to acquisition

    So, each year, the opening book values of the excess of fair value over book value must be added to the parent's books on the worksheet to get the subsidiaries values up from book value to the values that are needed to report at fair value at the purchase

View More Related Solutions