Ch07 - Chapter 7 UNDERSTANDING THE ISSUES 1. Equity prior...

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Unformatted text preview: Chapter 7 UNDERSTANDING THE ISSUES 1. Equity prior to sale of new shares................................................................................ $200,000 Equity gained by sale................................................................................................... 600,000 Total equity after sale................................................................................................... $800,000 Parent interest.............................................................................................................. 60% Parent equity................................................................................................................ $480,000 Price paid..................................................................................................................... 600,000 Excess of cost over book value.................................................................................... $120,000 Excess will likely be attributed to goodwill. 2. Excess calculation: 1/1/X1 1/1/X4 Equity........................................................................ $400,000 $500,000 Interest...................................................................... 20% 40% Equity........................................................................ $ 80,000 $200,000 Price......................................................................... 100,000 250,000 Excess...................................................................... $ 20,000 $ 50,000 Amortization period................................................... 10 10 Annual amortization.................................................. $ 2,000 $ 5,000 Parent income.......................................................... $100,000 Subsidiary income.................................................... 50,000 Equipment depreciation............................................ (7,000 ) Consolidated net income.......................................... $143,000 NCI (40% × $50,000)............................................... 20,000 Controlling [$100,000 + (0.60 × $50,000) – $7,000]. $123,000 3. Excess calculation: 1/1/X1 7/1/X6 Equity........................................................................ $450,000 $575,000 Interest...................................................................... 80% 10% Equity........................................................................ $360,000 $ 57,500 Price......................................................................... 500,000 150,000 Excess calculation:................................................... $140,000 $ 92,500 Amortization period................................................... 10 10 Annual amortization.................................................. $ 14,000 $ 9,250 Parent income.......................................................... $120,000 Subsidiary income.................................................... 50,000 Equipment depreciation............................................Equipment depreciation....
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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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Ch07 - Chapter 7 UNDERSTANDING THE ISSUES 1. Equity prior...

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