B. Woods Chapter 8 electronic

B Woods Chapter 8 - Chapter 8 CONSOLIDATIONS CHANGES IN OWNERSHIP INTERESTS Electronic supplement W8-1 Midyear poolings are accounted for by

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241 Chapter 8 CONSOLIDATIONS - CHANGES IN OWNERSHIP INTERESTS Electronic supplement W8-1 Midyear poolings are accounted for by recording the investment at the book value of the subsidiary's net assets at the time of pooling. In other words, the investment is recorded equal to beginning of the period net assets, increased by earnings up to the date of pooling and reduced by dividends paid prior to pooling. Since pooled income is equal to the combined income of the pooled entities for the entire year in which the pooling occurs, the investor records income from the pooled subsidiary up to the date of pooling.
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242 Consolidations - Changes in Ownership Interests W8-2 Pelvis's income excluding direct costs of combination $300,000 Less: Direct costs of combination (75,000) Add: Income from Solace for year ($100,000 x 90%) 90,000 Consolidated net income $315,000 W8-3 1 Income and dividends from Schenck Income from Schenck Sales ($1,500,000 - $1,200,000 expenses) x 90% $270,000 Dividends ($210,000 - $70,000 pre-pooling dividends) x 90% $126,000 2 Investment balance December 31, 2000 Stockholders' equity December 31, 2000 ($1,000,000 + $500,000 + $300,000 income - $210,000 dividends) $1,590,000 Percent ownership 90% Investment balance December 31, 2000 $1,431,000 Alternative computation: Schenck's equity at January 1 $1,500,000 Add: Income January 1 - May 1 100,000 Less: Dividends paid prior to pooling (70,000 ) Schenck's equity at May 1 1,530,000 Percent pooled 90% Investment balance May 1 1,377,000 Add: Income from Schenck May 1 - December 31 ($1,500,000 - $1,200,000) x 90% x 2/3 year 180,000 Less: Dividends ($210,000 - $70,000) x 90% (126,000 ) Investment balance December 31, 2000 $1,431,000
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Chapter 8 W8-4 1 Entry to record pooling Investment in Stockard $3,060,000 Other paid-in capital 100,000 Capital stock, $5 par $2,100,000 Retained earnings 700,000 Income from Stockard 360,000 To record 90% pooling of interest computed as follows: Total stockholders' equity at September 1 ($3,100,000 + $400,000 income - $100,000 dividends) $ 3,400,000 Percent acquired 90% Investment in Stockard $ 3,060,000 Capital stock after pooling ($10,000,000 + $2,100,000) $12,100,000 Paid-in capital before pooling: Padgett's $10,100,000 Stockard's ($2,200,000 x 90%) 1,980,000 12,080,000 Reduction in maximum retained earnings $ 20,000 (Retained earnings $900,000 - $100,000 dividends) x 90% $ 720,000 Less: Reduction in retained earnings 20,000 Retained earnings $ 700,000 2 Share of Stockard's dividends and income Cash $ 90,000 Investment in Stockard $ 90,000 To record share of Stockard's $100,000 dividends after September 1. Investment in Stockard $225,000 Income from Stockard $225,000 To record share of Stockard's income from September 1 through December 31 ($250,000 x 90%). Check:
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This note was uploaded on 04/04/2012 for the course ACCT 111 taught by Professor Bemo during the Spring '12 term at Nanyang Technological University.

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B Woods Chapter 8 - Chapter 8 CONSOLIDATIONS CHANGES IN OWNERSHIP INTERESTS Electronic supplement W8-1 Midyear poolings are accounted for by

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