Investment in Sal (+A)
|
38.7
|
|
Income from Sal (+R, +SE)
|
|
38.7
|
for income
|
|
|
Income from Sal (-R, -SE)
|
3.0
|
|
Dividends (+SE)
|
|
3.0
|
for Par dividends paid to Sal
| | |
Dividends (-SE)
|
27.0
|
|
Income from Sal (-R, -SE)
|
3.0
|
|
Cash (-A)
|
|
30.0
|
In place of the last entry, Par could record its dividend directly as:
Worksheet Entries
Income from Sal (-R, -SE)
|
35.7
|
|
Dividends (+SE)
|
|
18.0
|
Investment in Sal (-A)
|
|
17.7
|
Noncontrolling interest share (-SE)
|
4.3
|
|
Dividends (+SE)
|
|
2.0
|
Noncontrolling interest (+SE)
|
|
2.3
|
Common stock (-SE)
|
200.0
|
|
Retained earnings (-SE)
|
130.0
|
|
Investment in Sal (-A)
|
|
297.0
|
Noncontrolling interests (+SE)
|
|
33.0
|
Treasury stock (-SE)
|
70.0
|
|
Investment in Par (-A)
|
|
70.0
| Parent Mutually Held - Data Part owns 90% of Salt acquired at fair value equal to cost, no goodwill. Salt owns 10% of Part. At the start of 2012: - Investment in Salt, $226,154
- Investment in Part, $70,000
- Noncontrolling interest, $33,846
- Salt's total stockholders' equity
was $200,000 CS and $130,000 RE During 2012, - Separate income: Part $60,000, Salt $40,000
- Dividends: Part $30,000 (including $3,000 paid to Salt), Salt $20,000
Investment and noncontrolling interest
= 226,154 + 33,846
equals underlying equity less mutual holding
= 200,000+130,000-70,000.
Part Uses Conventional Method
Solved, substituting 2nd equation into 1st:
P = 105,495
S = 50,550
CI share = 94,945
NCI share = 5,055
Allocation information: Equations: P = $60,000 + .9S S = $40,000 + .1P CI share = .9P NCI share = .1S
|
Part
|
Salt
|
CI
|
NCI
|
Total
|
Separate Income
|
$60,000
|
$40,000
|
|
|
$100,000
|
Salt's allocation
|
.90S
| | |
.10S
| |
Part's allocation
| |
.10P
|
.90P
| | |
Conventional method is analogous to reciprocal cost allocation method.
Note on Results: Results: P = 105,495 S = 50,550 CI = 94,945 NCI = 5,055 CI + NCI = $100,000, the total separate income Part's Income from Salt = .9S - .1P = $34,945 CI = Part's separate income + Income from Salt $60,000 + $34,945 = $94,945 (as a check!) Part's Equity Method Entries
Cash (+A)
|
18,000
|
|
Investment in Salt (-A)
|
|
18,000
|
for dividends
|
|
|
Investment in Salt (+A)
|
34,945
|
|
Income from Salt (R, +SE)
|
|
34,945
|
for income
|
|
|
Investment in Salt (+A)
|
3,000
|
|
Dividends (-SE)
|
|
3,000
|
for Part dividends paid to Salt
| | | Worksheet Entries - Conventional
Income from Salt (-R, -SE)
|
34,945
|
|
Dividend Income (-R, -SE)
|
3,000
| |
Dividends (+SE)
|
|
18,000
|
Investment in Salt (-A)
|
|
19,945
|
Noncontrolling interest share (-SE)
|
5,055
|
|
Dividends (+SE)
|
|
2,000
|
Noncontrolling interest (+SE)
|
|
3,055
|
Common stock (-SE)
|
200,000
|
|
Retained earnings (-SE)
|
130,000
|
|
Investment in Salt (-A)
|
|
296,154
|
Noncontrolling interests (+SE)
|
|
33,846
|
Investment in Salt (+A)
|
70,000
| |
Investment in Part (-A)
| |
70,000
| Subsidiary Stock Mutually Held Subsidiaries hold stock in each other - Use conventional approach
- Treasury stock method is not appropriate
- It is not parent's stock
- Subsidiary stock is eliminated in consolidation
Subsidiary Mutual Holdings Pal owns 80% of Set acquired at book value plus $25,000 goodwill. Set owns 70% of Ton acquired at book value plus $10,000 goodwill. Ton owns 10% of Set, cost method. At the start of 2013: - Investment in Set (by Pal, 80%), $340,000
- Investment in Ton (by Set, 70%), $133,000
- Investment in Set (by Ton, 10%), $40,000
- Noncontrolling interest, $102,000
For 2013:
|
Pal
|
Set
|
Ton
|
Separate income
|
112,000
|
51,000
|
40,000
|
Dividends
|
50,000
|
30,000
|
20,000
| Equations: P = 112,000 + .8S S = 51,000 + .7T T = 40,000 + .1S CI = 1P NCI = .3T + .1S Solve, substituting 2nd equation into 3rd (or 3rd into 2nd): T = 48,495 S = 84,946 P = 179,957 CI share = 179,957 NCI share = 14,548 + 8,495 = 23,043
Allocation Info.
|
Pal
|
Set
|
Ton
|
CI
|
NCI
|
Total
|
Separate income
|
112,000
|
51,000
|
40,000
|
|
|
203,000
|
Ton's allocation
|
|
.7T
|
|
|
.3T
|
|
Set's allocation
|
.8S
|
|
.1S
|
|
.1S
|
|
Pal's allocation
|
|
|
|
1.0P
|
|
| A Look at the Results Results: T = 48,495 S = 84,946 P = 179,957 CI share = 179,957 NCI share = 14,548 + 8,495 = 23,043 Consolidated income - CI and NCI shares = 203,000, total separate income
Intercompany income - Pal's Income from Set = .8S = 67,957
- Set's Income from Ton = .7T = 33,946
- Ton's Dividend income = .1(Set's dividends) = 3,000
- Pal's separate income + income from Set = 179,957
- Set's separate income + income from Ton = 84,946
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