Exercise 4-6 Part A: Journal Entries Investment in Sales 350,000
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Transcript of Exercise 4-6 Part A: Journal Entries Investment in Sales 350,000
Exercise 4-6 Part A: Journal Entries Investment in Sales 350,000
Cash 350,000 Investment in Sales ($148,000)(.85) 125,800 Equity in Subsidiary Income 125,800
Cash ($50,000)(.85) 42,500Investment in Sales 42,500
To account for reduction in equity due to dividends
Part B:Workpaper Entries1- Equity income- Sales Company 125,800
Investment in Sales 125800
2- Investment 42500 Dividends declared 42500
3-Common Stock 100,000 Other Contributed Capital 40,000 Retained Earnings 1/1 140,000 Difference (IV and BV) 131,765
Investment in Sales 350,000 Noncontrolling Interest 61,765
4- Land 131,765 Difference (IV and BV) 131,765
Computation and Allocation of Difference between Implied and Book Value Acquired
Parent Non- Entire
Share Controlling ValueShare
Purchase price and implied value 350,000 61,765 411,765 *
Less: Book value of equity acquired: 238,000 42,000 280,000
Difference (IV and BV) 112,000 19,765 131,765
Allocated to land (112,000) (19,765) (131,765)
Balance - 0 - - 0 - - 0 -
Exercise 4-7 Part A: Journal Entries _2010Investment in Sales (.85)($190,000) 161,500
Equity in Subsidiary Income 161,500
Cash 42,500 Investment in Sales (.85)($50,000) 42,500
Part B: Workpaper Entries
1- Equity in Subsidiary Income 161,500 Investment in Sales 161500
2- Investment 42500 Dividends Declared 42500
3- Common Stock 100,000 Other Contributed Capital 40,000 Retained Earnings 1/1 * 238,000 Difference (IV and BV) 131,765 Investment in Sales ($350,000 + $83,300**)433,300 NCI ($61,765 + $14,700***) 76,465
* $140,000 + ($148,000 - $50,000)** ($148,000 - $50,000) x .85*** ($148,000 - $50,000) x .15
Exercise 4-10 Part A: Journal Entries
1- Investment in Star 210,000 Cash 210,000
2- Investment in Star (0.90 ( (3/12) ( $60,000) 13,500 Equity in Subsidiary Income 13,500
3- Cash (0.90 ( $10,000) 9,000
Investment in Star 9,000 To account for reduction in equity due to dividends
Part B:Workpaper Entries
1- Equity in Subsidiary Income 13,500 Investment in Star 13500
2- Investment in Star 9000 Dividends declared 9000
3- Common Stock - Star 70,000 Other Contributed Capital – Star 30,000 Retained Earnings – Star * 115,000 Difference between Implied and Book Value ** 18,333
Investment in Star 210,000Noncontrolling Interest 23,333
**Computation and Allocation of Difference between Implied and Book Value Acquired
Parent Non- EntireShare Controlling Value
SharePurchase price and implied value 210,000 23,333 233,333 *
Less: Book value of equity acquired:
Equity 153,000 17,000 170,000
Subsidiary Income purchased 40,500 4,500 45,000 **
Total book value 193,500 21,500 215,000
Difference (implied and book value) 16,500 1,833 18,333
Goodwill (16,500) (1,833) (18,333)
Balance - 0 - - 0 - - 0 -
4- Goodwill 18,333 Difference (Implied and Book Value) 18,333
* Retained earnings on 10/1/10Retained earnings on 1/1/10 $ 70,000Income purchased to 10/1/10 (9/12 x $60,000) 45,000Retained earnings on 10/1/10 $ 115,000
Exercise 4-10 Part A: Journal Entries
1- Investment in Star 210,000 Cash 210,000
2- Investment in Star (0.90 ( (3/12) ( $60,000) 13,500 Equity in Subsidiary Income 13,500
3- Cash (0.90 ( $10,000) 9,000
Investment in Star 9,000 To account for reduction in equity due to dividends
Part C: Workpaper Entries- Full year reporting alternative
1- Equity in Subsidiary Income 13,500 Investment in Star 13500
2- Investment in Star 9000 Dividends declared 9000
3- Common Stock - Star 70,000 Other Contributed Capital 30,000 Retained Earnings 70,000 Purchased Income 45,000Difference (Implied and Book Value) 18,333
Investment in Star 210,000Noncontrolling Interest $23,333
**Computation and Allocation of Difference between Implied and Book Value Acquired
Parent Non- EntireShare Controlling Value
SharePurchase price and implied value 210,000 23,333 233,333 *
Less: Book value of equity acquired:
Equity 153,000 17,000 170,000
Subsidiary Income purchased 40,500 4,500 45,000 **
Total book value 193,500 21,500 215,000
Difference (implied and book value) 16,500 1,833 18,333
Goodwill (16,500) (1,833) (18,333)
Balance - 0 - - 0 - - 0 -