Chapter Four

1
Chapter Four
Consolidation with Outside Ownership
Reporting Options (Income Statement)
1
Parents Share of Revenue Expenses
Total Revenue Expenses Noncontrolling
Interest
2
3
Total includes parents share of extra
amortizations.
Total includes 100 of extra amortizations.
2
Reporting Options (Balance Sheet)
1
Parents Share of Assets Liabilities
Total Assets Liab. Noncontrolling Interest
2
3
Total includes parents share of extra assets.
Total includes 100 of extra assets.
3
Econ Unit
Proportion.
Parent Co.
Example, p.159
4
Prob 4-39
60
Parent Co
100
Econ Unit
(400,000 ? 0.60) - 470,000
5
Econ. Unit 380,000 250,000 378,000
252,000
Entry (S)
Parent Co. R/E 380,000 Common Stock 250,000 Invs
t in Houston 378,000 NC int Hstn 1/1/05 252,000
Both methods treat book values of subsidiary the
same.
6
Econ. Unit 124,000 14,000 51,667 21,
000 101,200 67,467
Entry (A)
Parent Co. Buildings 74,400 Bonds
Payable 8,400 Goodwill 31,000 Equipment 12,600
Invst in Houston 101,200 NC int Hstn 1/1/05
Buildings 93,000 3 x 6,200 Bonds
Payable 12,000 3 x 1,200 Goodwill 31,000 Equipm
ent (18,000) 3 x (1,800)
155,000 3 x 10,333 20,000 3 x
2,000 51,667 (30,000) 3 x (3,000)
60
100
7
Econ. Unit 36,400 36,400
Entry (I)
Parent Co. Equity in Hstn inc. 36,400 Invst in
Houston 36,400
The parents share of subsidiary income is the
same under both methods 60(70,000) - 5,600
36,400
Econ. Unit 24,000 24,000
Entry (D)
Parent Co. Invst in Houston 24,000 Dividends
Paid 24,000
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Econ. Unit 7,333 2,000 3,000 10,333
2,000
Entry (E)
Parent Co. Deprec Expense 4,400 Interest
Expense 1,200 Equipment 1,800 Buildings 6,200 B
onds Payable 1,200
60
100
9
Econ. Unit 24,266 319,467 16,000 3
27,733
Noncontrolling Interest Entry
Parent Co. NCint in Hstn
inc. 28,000 NCint Hstn 1/1/05 252,000 Dividends
Paid 16,000 NCint Hstn 12/31 264,000
40 (70,000 - 9,333)
252,000 67,467
10
Prob 4-27
156,000 (80 x 140,000) 44,000
Part (e) Purchase took place on July 1, 2004
Entry (S) R/E (1/1/04) 95,000 Preacq
Income 4,000 Common Stock 40,000 Invst in
Goldm 112,000 NC int Gldm 1/1/04 27,000
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Part (e) Purchase took place on July 1, 2004
(E) 800
(S) 4,000
(2,000)
(I) 3,200
½ year amortization
20 x 10,000
12
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