Week6 HW - Exercise 8-2 January 1, 2011 Investment in...

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Exercise 8-2 January 1, 2011 Investment in Serbin Company 220,000 Cash 220,000 Note: The $9,333 transfer to paid in capital is handled in consolidation. April 1, 2011 Cash 260,000 Investment in Serbin Company ((21,600/72,000) × $490,000) 147,000 Additional Contributed Capital 113,000 September 30, 2011 Cash 16,750 Dividend Income (.67* × $25,000) 16,750 * .67 = (72,000 + 30,000 -21,600) ÷ 120,000 Exercise 8-5 Part A 2010 Investment in Serbin Company 490,000 Cash 490,000 Cash 12,000 Investment in Serbin Company (.60 × $20,000 subsidiary dividend) 12,000 Investment in Serbin Company 27,600 Equity in Subsidiary Income (.60 × $46,000 subsidiary income) 27,600 2011 Investment in Serbin Company 210,667 Additional Paid in Capital – Papke Company a 9,333 Cash 220,000 a Price paid for 25% interest 220,000 Less interest acquired: 8 - 1
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Common Stock (25% x 600,000) 150,000 Retained Earnings (25% x $201,000) 50,250 Goodwill (25% x $41,667) 10,417 (210,667 )* Adjustment to Additional Contributed Capital – Papke 9,333 * or 25% of the total carrying value of Serbin Company, or ($490,000/.60) plus the change in retained earnings for 2008 of $26,000), or (25%) ($842,667) = $210,667. Investment in Serbin Company 12,750 Equity in Subsidiary Income (.85 × $15,000 income for 1st three months) 12,750 Cash 260,000 Investment in Serbin Company* 154,380 Additional Contributed Capital 105,620 Cost of first purchase (60%) $490,000 2010 subsidiary income (.60 × $46,000) 27,600 2010 subsidiary dividends (.60 × $20,000) (12,000) 2011 subsidiary income to April 1 (.60 × $15,000) 9,000 Total 514,600 Portion sold (21,600/72,000) × .30 Carrying value of investment sold $154,380 Cash 16,750 Investment in Serbin Company (.67** × $25,000 subsidiary dividend) 16,750 ** .67 =(72,000 + 30,000 -21,600) ÷ 120,000 Investment in Serbin Company 30,150 Equity in Subsidiary Income [.67 × ($60,000 - $15,000)] 30,150 Part B Equity in Subsidiary Income ($12,750 + $30,150) 42,900 Subsidiary Income Sold ($15,000 × .60 × .30) 2,700 Dividends Declared – Serbin ($25,000 × .67) 16,750 Investment in Serbin Company 23,450 8 - 2
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Common Stock - Serbin 600,000 1/1 Retained Earnings – Serbin 201,000 Difference between Implied and Book Value 41,667 Investment in Serbin Company 564,587 Noncontrolling interest b 278,080 Goodwill 41,667 Difference between Implied and Book Value 41,667 Computation and Allocation of Difference between Implied and Book Value Acquired Parent Non- Entire Share Controlling Value Share Purchase price and implied value $490,000 326,667 816,667 Less: Book value of equity acquired: Common Stock (360,000) (240,000) (600,000) Retained Earnings (105,000) (70,000) (175,000) Difference between implied and book value 25,000 16,667 41,667 Goodwill (25,000) (16,667) ( 41,667) Balance - 0 - - 0 - - 0 - a Price paid for 25% interest 220,000 Less interest acquired: Common Stock (25% × 600,000) 150,000 Retained Earnings (25% × $201,000) 50,250 Goodwill (25% × $41,667) 10,417
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Week6 HW - Exercise 8-2 January 1, 2011 Investment in...

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