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Unformatted text preview: ation Entry 2-22 Worksheet for Consolidated Balance Sheet, January 1, 20X1; 80% Acquisition at Book Value 2-23 Consolidated Balance Sheet, January 1, 20X1; 80% Acquisition at Book Value 2-24 Additional Information 2-25 Initial Year of Ownership : Parent Company Entries 2-26 Initial Year of Ownership : Elimination Entries 2-27 2-28 Second Year of Ownership: Parent Companies Entries 2-29 Second Year of Ownership: Elimination Entries 2-30 2-31 Example: Basic Elimination Entry 1) 2) 3) 4) 5) 6) Given the following information: Photo owns 70% of Snap Snap’s net income for 20X4 is $160,000 Photo’s net income for 20X4 from its own separate operations is $500,000. Snap’s declares dividends of $12,000 during 20X4. Snap has 10,000 shares of $4 par stock outstanding that were originally issued at $14 per share. Snap’s beginning balance in Retained Earnings for 20X4 is $120,000. Photo 70% Snap 2-32 Example: Basic Elimination Entry 2-33 Consolidated Net Income + Parent’s Income from its own operations (excluding any investment income from consolidated sub.) + Net Income from each of the consolidated sub. (adjusted for any differential write-off) = CONSOLIDATED NET INCOME • If all sub. are wholly owned → all of the consolidated net income accrues to the parent company. • If one or more of the consolidated sub. is less than wholly owned → a portion of the consolidated net income accrues to the non-controlling shareholders. 2-34 Consolidated Net Income: Example Push Corporation purchases 80% of the stock of Shove Company for an amount equal to 80% of its book value. During 20X1, Shove reports net income of $25,000, while Push reports net income of $120,000, including equity-method income from Shove of $20,000 ($25,000 X 0.80). Consolidated Net Income for 20X1 is computed and allocated as...
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This document was uploaded on 02/23/2014 for the course BUS 434 at Stonehill.

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