B. Woods Chapter 9 electronic

B. Woods Chapter 9 electronic - 33 Chapter 9 INDIRECT AND...

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Unformatted text preview: 33 Chapter 9 INDIRECT AND MUTUAL HOLDINGS Electronic Supplement Solution W9-1 1 Affiliation diagram Perez 60% 80% 70% 20% Alice Betty Carol 70% 90% 10% Donna Effie 2 Income allocation schedule Perez Alice Betty Carol Donna Effie Total Reported incomes $110,000 $20,000 $35,000 $(15,000) $(20,000) $40,000 $170,000 Dividend income: from Alice (6,000) (2,000) (8,000) from Betty (16,000) (16,000) from Donna (3,500) (3,500) from Effie (13,500) (13,500) Unrealized gain on sale of equipment to Effie (12,000 ) (12,000 ) Separate realized incomes 88,000 4,500 19,500 (15,000) (20,000) 40,000 $117,000 Allocate Donna 70% to Alice (14,000 ) 14,000 Net loss of Alice (9,500) Allocate Alice 60% to Perez (5,700) 5,700 20% to Betty 1,900 (1,900) Allocate Carol 70% to Perez (10,500) 10,500 10% to Effie 1,500 (1,500 ) Net income of Effie 38,500 Allocate Effie 34 Indirect and Mutual Holdings 90% to Betty 34,650 (34,650) Net income of Betty 52,250 Allocate Betty 80% to Perez 41,800 (41,800) Consolidated net income $113,600 $113,600 Minority interest expense $(1,900 ) $10,450 $ (3,000 ) $ (6,000 ) $ 3,850 3,400 $117,000 () Deduct or loss 35 Chapter 9 Solution W9-2 Palmore Corporation and Subsidiaries Consolidated Income Statement for the year ended December 31, 2006 Sales [$980,000 - $60,000] $920,000 Cost of sales [$520,000 - $60,000 + $15,000] 475,000 Gross profit 445,000 Other expenses [$200,000 - $4,000] 196,000 Total consolidated income 249,000 Less: Minority interest income (see note) 23,900 Consolidated net income $225,100 Note: Computation of minority interest expense Minority interest expense in Tonkin ($50,000 - $15,000) x 20% $ 7,000 Minority interest expense in Summit [$95,000 - ($15,000 x 70%)] x 20% 16,900 Check: Palmore Summit Tonkin Separate incomes $150,000 $ 60,000 $ 50,000 Unrealized inventory profit (15,000) Recognition of deferred profit on equipment 4,000 Separate realized incomes 154,000 60,000 35,000 Allocate Tonkin's income 10% to Palmore, 70% to Summit 3,500 24,500 (28,000) Summit's income 84,500 Allocate Summit's income 80% to Palmore 67,600 (67,600) Palmore's net income and consolidated net income $225,100 Minority interest expense $ 16,900 $ 7,000 36 Indirect and Mutual Holdings Solution W9-3 Preliminary computations: Panda 90% 80% Ape 70% Baboon Chimp Excess of cost over book value acquired: Book Value Cost Acquired Excess Panda's 90% investment in Ape $380,000 $360,000 $20,000 Ape's 80% investment in Baboon 220,000 140,000 80,000 Ape's 70% investment in Chimp 155,000 105,000 50,000 1 Schedule to adjust investment balances to an equity basis Panda's 90% Ape's 80% Ape's 70% Investment Investment Investment in Ape in Baboon in Chimp Investment balance January 1, 2003 $380,000 Income from Ape-2003 on equity basis ($80,000 x 90%) - $2,000 patent amortization 70,000 Dividends-2003 ($40,000 x 90%) (36,000 ) Investment balance January 1, 2004 414,000 $220,000 $155,000 Income from Chimp-2004 on equity basis ($30,000 x 70%) - $5,000 patent amortization...
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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 9 electronic - 33 Chapter 9 INDIRECT AND...

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