Ch06 - CHAPTER 6 UNDERSTANDING THE ISSUES 1. a. Investing...

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Unformatted text preview: CHAPTER 6 UNDERSTANDING THE ISSUES 1. a. Investing activitiesPurchase of S Company ($800,000 $50,000).................... $(750,000) b. Investing activitiesPurchase of S Company ($500,000 $50,000).................... $(450,000) Noncash financing activitiesIssuance of notes payable..................................... $300,000 c. Investing activitiesCash acquired in purchase of S Company............................ $50,000 Noncash financing activitiesIssuance of stock................................................... $800,000 2. Any amortizations of the $200,000 excess of cost over book value will need to be included in cashoperating activities as an adjustment to income. The means of purchasing S Company will not have an effect on the consolidated statement of cash flows in subsequent years. 3. a. Investing activitiesPurchase of S Company ($640,000 $50,000).................... $(590,000) Noncash financing activitiesNoncontrolling interest........................................... $120,000 b. Investing activitiesPurchase of S Company ($400,000 $50,000).................... $(350,000) Noncash financing activitiesIssuance of notes payable..................................... $240,000 Noncash financing activitiesNoncontrolling interest........................................... $120,000 c. Investing activitiesCash acquired in purchase of S Company............................ $50,000 Noncash financing activitiesIssuance of stock................................................... $640,000 Noncash financing activitiesNoncontrolling interest........................................... $120,000 4. a. Consolidated basic EPS = ($200,000 + $60,000) 100,000 shares = $2.60 b. Consolidated basic EPS = [$200,000 + (80% $60,000)] 100,000 shares = $2.48 5. a. Consolidated DEPS = [$200,000 + (40,000 $1.43)] 100,000 shares = $2.57 Subsidiary DEPS = $60,000 (40,000 + 2,000) = $1.43 b. Consolidated DEPS = [$200,000 + (40,000 $1.50)] (100,000 + 2,000) = $2.55 Subsidiary DEPS = $60,000 40,000 shares = $1.50 c. Consolidated DEPS = [$200,000 + (40,000 $1.50)] (100,000 + 2,000) = $2.55 Subsidiary DEPS = $60,000 40,000 shares = $1.50 6. a. Consolidated Net Income = ($100,000 + $40,000) 70% = $98,000 Distribution to NCI = ($40,000 20%) 70% = $5,600 Distribution to Controlling Interest = [$100,000 + ($40,000 80%)] 70% = $92,400 b. Consolidated Net Income = [($100,000 + $40,000) 70%] ($40,000 70% 80% 20% 30%) = $96,656 Distribution to NCI = ($40,000 20%) 70% = $5,600 Distribution to Controlling Interest = [($100,000 + ($40,000 80%) 70%] ($40,000 70% 80% 20% 30%) = $91,056 7. a. Taxes would not be paid on this intercompany profit. Taxes are based on consolidated income after the elimination of the profit....
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This note was uploaded on 04/07/2008 for the course ACCT. 3533 taught by Professor Jahanian during the Spring '08 term at Temple.

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Ch06 - CHAPTER 6 UNDERSTANDING THE ISSUES 1. a. Investing...

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