1. Chapter Four Consolidation with Outside Ownership Reporting Options (Income Statement) Parent’s Share of Revenue & Expenses Total Revenue & Expenses – Noncontrolling Interest Total includes parent’s share of extra amortizations. Total includes 100% of extra amortizations. 1 2 3

2. Reporting Options (Balance Sheet) Parent’s Share of Assets & Liabilities Total Assets & Liab. – Noncontrolling Interest Total includes parent’s share of extra assets. Total includes 100% of extra assets. 1 2 3

3. Current assts Bldg & equip Total Parent claim Goodwill $ 96,000 216,000 $360,000 48,000 $ 96,000 216,000 $360,000 48,000 $ 96,000 216,000 $360,000 48,000 Example, p.159 Econ UnitProportion.Parent Co. Current assts Bldg & equip Total Noncnt intrst Goodwill $ 64,000 144,000 $240,000 32,000 $ 0 0 0 $ 64,000 96,000 $160,000 0 Current assts Bldg & equip Total Subsid assts Goodwill $160,000 360,000 $600,000 80,000 $ 96,000 216,000 $360,000 48,000 $160,000 312,000 $520,000 48,000

4. ExcessAnnual CostAmortization Equipment$(18,000)10 yrs$(1,800) Buildings93,00015 yrs6,200 Bonds Payable 12,00010 yrs1,200 Goodwill 31,000- - Total$118,000$5,600 ExcessAnnual CostAmortization Equipment$(30,000)10 yrs$(3,000) Buildings155,00015 yrs10,333 Bonds Payable 20,00010 yrs2,000 Goodwill 51,667- - Total$196,667$9,333 Parent Co 60% 100% Econ Unit ($400,000  0.60) - $470,000 Prob 4-39

5. Entry (S) Parent Co. R/E380,000 Common Stock250,000 Invst in Houston378,000 NC int Hstn 1/1/05252,000 Econ. Unit 380,000 250,000 378,000 252,000 Both methods treat book values of subsidiary the same.

6. Entry (A) Parent Co. Buildings74,400 Bonds Payable8,400 Goodwill31,000 Equipment12,600 Invst in Houston101,200 NC int Hstn 1/1/05 Econ. Unit 124,000 14,000 51,667 21,000 101,200 67,467 Buildings93,000–3 x 6,200 Bonds Payable12,000–3 x 1,200 Goodwill31,000 Equipment (18,000)–3 x (1,800) 155,000–3 x 10,333 20,000–3 x 2,000 51,667 (30,000)–3 x (3,000) 60%100%

7. Entry (I) Parent Co. Equity in Hstn inc.36,400 Invst in Houston36,400 Econ. Unit 36,400 Entry (D) Parent Co. Invst in Houston24,000 Dividends Paid24,000 Econ. Unit 24,000 The parent’s share of subsidiary income is the same under both methods: 60%($70,000) - $5,600 = $36,400

8. Entry (E) Parent Co. Deprec Expense4,400 Interest Expense1,200 Equipment1,800 Buildings6,200 Bonds Payable1,200 Econ. Unit 7,333 2,000 3,000 10,333 2,000 60%100%

9. Noncontrolling Interest Entry Parent Co. NCint in Hstn inc.28,000 NCint Hstn 1/1/05252,000 Dividends Paid16,000 NCint Hstn 12/31264,000 Econ. Unit 24,266 319,467 16,000 327,733 40% ($70,000 - $9,333) $252,000 + $67,467

10. ExcessAnnual CostAmortization Land$ 8,000- Buildings16,00010 yrs$1,600 Goodwill 20,000- - Total$44,000$1,600 Prob 4-27 $156,000 – (80% x $140,000) = $44,000 Entry (S) R/E (1/1/04)95,000 Preacq Income4,000 Common Stock40,000 Invst in Goldm112,000 NC int Gldm 1/1/0427,000 Part (e) Purchase took place on July 1, 2004

11. Debits Revenues Expenses Ncint sub inc Eqty in Sub Net Inc Inc Stmnt Preacq Inc Palm Co. $ (300,000) 200,000 0 (3,200) $ (103,200) 0 Storm Co. $ (100,000) 90,000 0 0 $ (10,000) 0 Totals $ (400,000) 290,800 2,000 0 $ (103,200) 4,000 ½ year amortization (I)3,200 (E)800 (S)4,000 NC Int (2,000) 20% x $10,000 Part (e) Purchase took place on July 1, 2004