Exercise 4-6 Part A: Journal Entries Investment in Sales 350,000 Cash 350,000 Investment in Sales ($148,000)(.85)125,800 Equity in Subsidiary Income 125,800.

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Presentation transcript:

Exercise 4-6 Part A: Journal Entries Investment in Sales 350,000 Cash 350,000 Investment in Sales ($148,000)(.85)125,800 Equity in Subsidiary Income 125,800 Cash($50,000)(.85) 42,500 Investment in Sales42,500 To account for reduction in equity due to dividends

Part B:Workpaper Entries 1- Equity income- Sales Company 125,800 Investment in Sales Investment Dividends declared Common Stock 100,000 Other Contributed Capital 40,000 Retained Earnings 1/1 140,000 Difference (IV and BV) 131,765 Investment in Sales 350,000 Noncontrolling Interest 61,765

4- Land 131,765 Difference (IV and BV)131,765 Computation and Allocation of Difference between Implied and Book Value Acquired ParentNon-Entire ShareControllingValue Share Purchase price and implied value 350,00061,765411,765 * Less: Book value of equity acquired:238,00042,000280,000 Difference (IV and BV)112,00019,765131,765 Allocated to land (112,000)(19,765)(131,765) Balance

Exercise 4-7 Part A: Journal Entries _2010 Investment in Sales (.85)($190,000)161,500 Equity in Subsidiary Income161,500 Cash 42,500 Investment in Sales (.85)($50,000) 42,500

Part B:Workpaper Entries 1-Equity in Subsidiary Income 161,500 Investment in Sales Investment Dividends Declared Common Stock 100,000 Other Contributed Capital 40,000 Retained Earnings 1/1 * 238,000 Difference (IV and BV) 131,765 Investment in Sales ($350,000 + $83,300**)433,300 NCI ($61,765 + $14,700***) 76,465 * $140,000 + ($148,000 - $50,000) ** ($148,000 - $50,000) x.85 *** ($148,000 - $50,000) x.15

4- Land 131,765 Difference (IV and BV)131,765

Exercise 4-10 Part A: Journal Entries 1-Investment in Star 210,000 Cash210, Investment in Star (0.90 ( (3/12) ( $60,000)13,500 Equity in Subsidiary Income 13,500 3-Cash (0.90 ( $10,000)9,000 Investment in Star9,000 To account for reduction in equity due to dividends

Part B:Workpaper Entries 1- Equity in Subsidiary Income 13,500 Investment in Star Investment in Star 9000 Dividends declared Common Stock - Star 70,000 Other Contributed Capital – Star 30,000 Retained Earnings – Star * 115,000 Difference between Implied and Book Value **18,333 Investment in Star 210,000 Noncontrolling Interest 23,333

**Computation and Allocation of Difference between Implied and Book Value Acquired ParentNon- Entire ShareControlling Value Share Purchase price and implied value 210,00023, ,333 * Less: Book value of equity acquired: Equity153,00017, ,000 Subsidiary Income purchased40,5004,500 45,000 ** Total book value193,50021, ,000 Difference (implied and book value)16,5001,833 18,333 Goodwill (16,500)(1,833) (18,333) Balance

4- Goodwill 18,333 Difference (Implied and Book Value) 18,333 * Retained earnings on 10/1/10 Retained earnings on 1/1/10 $ 70,000 Income purchased to 10/1/10 (9/12 x $60,000) 45,000 Retained earnings on 10/1/10 $ 115,000

Exercise 4-10 Part A: Journal Entries 1-Investment in Star 210,000 Cash210, Investment in Star (0.90 ( (3/12) ( $60,000)13,500 Equity in Subsidiary Income 13,500 3-Cash (0.90 ( $10,000)9,000 Investment in Star9,000 To account for reduction in equity due to dividends

Part C:Workpaper Entries- Full year reporting alternative 1- Equity in Subsidiary Income 13,500 Investment in Star Investment in Star 9000 Dividends declared Common Stock - Star70,000 Other Contributed Capital 30,000 Retained Earnings 70,000 Purchased Income 45,000 Difference (Implied and Book Value)18,333 Investment in Star 210,000 Noncontrolling Interest$23,333

**Computation and Allocation of Difference between Implied and Book Value Acquired ParentNon- Entire ShareControlling Value Share Purchase price and implied value 210,00023, ,333 * Less: Book value of equity acquired: Equity153,00017, ,000 Subsidiary Income purchased40,5004,500 45,000 ** Total book value193,50021, ,000 Difference (implied and book value)16,5001,833 18,333 Goodwill (16,500)(1,833) (18,333) Balance

4- Goodwill 18,333 Difference (Implied and Book Value) 18,333