Subsidiary Company S had the following stockholders’ equity on January 1, 2018, prior to issuing 20,000 additional new shares to noncontrolling shareholders: Common stock ($1 par), 100,000 shares issued and outstanding . . . . . . . Paid-incapitalinexcessofpar .................................. Retainedearnings ............................................ Totalequity ............................................... $    100,000 1,900,000 2,000,000 $4,000,000 At that time, the parent company owned 90,000 Company S shares. Assume that the parent acquired the shares at a price equal to their book value. What is the impact on the parent’s investment account of the sale of 20,000 additional shares by the subsidiary for $45 per share?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Subsidiary Company S had the following stockholders’ equity on January 1, 2018, prior to issuing 20,000 additional new shares to noncontrolling shareholders: Common stock ($1 par), 100,000 shares issued and outstanding . . . . . . . Paid-incapitalinexcessofpar .................................. Retainedearnings ............................................ Totalequity ............................................... $    100,000 1,900,000 2,000,000 $4,000,000 At that time, the parent company owned 90,000 Company S shares. Assume that the parent acquired the shares at a price equal to their book value. What is the impact on the parent’s investment account of the sale of 20,000 additional shares by the subsidiary for $45 per share? 

University of the Virgin x Bb Home Page - ACC 443 X
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uvi-bookshelf.vitalsource.com/reader/books/9781305464803/pageid/485
Worksheet 8-2
Treasury Stock Method for Parent Shares Owned by Subsidiary
Company P and Subsidiary Company S
Worksheet for Consolidated Financial Statements
For Year Ended December 31, 2017
1
2
12
13
14
15
16
17
3
4
Investment in Company P (10%, at cost)
5
Equipment
6 Accumulated Depreciation
7
Common Stock Company P
8 Retained Earnings, January 1, 2017-Company P
9 Common Stock Company St
10
11
18
(Credit balance amounts are in parentheses.)
19
Investment in Company S (80%)
Retained Earnings, January 1, 2017-Company S
Sales
Cost of Goods Sold
Expenses
Subsidiary Income
Treasury Stock (at cost)
Consolidated Net Income
To NCI (see distribution schedule)
My Courses Home X
Type here to search
밥
University of the Virgin x b Subsidiary Company S X G Subsidiary Company SX +
Trial Balance
Company P
248,000
608,000
(100,000)
(500,000)
(200,000)
(300,000)
180,000
80,000
(16,000)
0
Company S
80,000
180,000
(50,000)
(100,000)
(90,000)
(200,000)
120,000
60,000
0
26°C Mostly clear
Q AA
462
0
P
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Transcribed Image Text:University of the Virgin x Bb Home Page - ACC 443 X ← → C < = ធ A uvi-bookshelf.vitalsource.com/reader/books/9781305464803/pageid/485 Worksheet 8-2 Treasury Stock Method for Parent Shares Owned by Subsidiary Company P and Subsidiary Company S Worksheet for Consolidated Financial Statements For Year Ended December 31, 2017 1 2 12 13 14 15 16 17 3 4 Investment in Company P (10%, at cost) 5 Equipment 6 Accumulated Depreciation 7 Common Stock Company P 8 Retained Earnings, January 1, 2017-Company P 9 Common Stock Company St 10 11 18 (Credit balance amounts are in parentheses.) 19 Investment in Company S (80%) Retained Earnings, January 1, 2017-Company S Sales Cost of Goods Sold Expenses Subsidiary Income Treasury Stock (at cost) Consolidated Net Income To NCI (see distribution schedule) My Courses Home X Type here to search 밥 University of the Virgin x b Subsidiary Company S X G Subsidiary Company SX + Trial Balance Company P 248,000 608,000 (100,000) (500,000) (200,000) (300,000) 180,000 80,000 (16,000) 0 Company S 80,000 180,000 (50,000) (100,000) (90,000) (200,000) 120,000 60,000 0 26°C Mostly clear Q AA 462 0 P X ENG 19:18 US 03/03/2023 > : /1142 >
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University of the Virgin x Bb Home Page - ACC 443 X
A
14 Expenses
15 Subsidiary Income
uvi-bookshelf.vitalsource.com/reader/books/9781305464803/pageid/485
16
17
18
19
20
21
23
Treasury Stock (at cost)
22 Retained Earnings, Controlling Interest, December 31, 2017
Consolidated Net Income
To NCI (see distribution schedule)
Balance to Controlling Interest (see distribution schedule)
Total NCI
Eliminations and Adjustments:
(A)
(TS)
My Courses Home X
(CY)
(EL)
(D)/(NCI)
Type here to search
University of the Virgin x b Subsidiary Company S X G Subsidiary Company SX +
밥
80,000
(16,000)
Eliminate the entry made by the parent during the current year to record its share of Company S income.
Eliminate 80% of the January 1, 2017, subsidiary equity balances against the investment in Company S account.
Distribute the excess of cost over book value and the NCI adjustment to the equipment account as specified by
the determination and distribution of excess schedule applicable to the Investment in Company S.
Amortize the excess of $100,000 for the past two years and the current year at the rate of $5,000 per year.
The investment in Company P must be at cost. If any equity adjustments have been made, they must be reversed and
the investment in the parent returned to cost. If the shares are to be reissued, as is the case in this example, the investment
is then transferred to the treasury stock account, a contra account to total consolidated stockholders' equity.
As an alternative to entry (TS), the cost of the treasury shares could be used to retire them on the worksheet as follows:
Common Stock-Company P
Retained Earnings Company P
Investment in Company P.
0
60,000
0
50,000
30,000
80,000
26°C Mostly clear
Q
AA
462
0
X
ENG
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Transcribed Image Text:← → C < = ធ University of the Virgin x Bb Home Page - ACC 443 X A 14 Expenses 15 Subsidiary Income uvi-bookshelf.vitalsource.com/reader/books/9781305464803/pageid/485 16 17 18 19 20 21 23 Treasury Stock (at cost) 22 Retained Earnings, Controlling Interest, December 31, 2017 Consolidated Net Income To NCI (see distribution schedule) Balance to Controlling Interest (see distribution schedule) Total NCI Eliminations and Adjustments: (A) (TS) My Courses Home X (CY) (EL) (D)/(NCI) Type here to search University of the Virgin x b Subsidiary Company S X G Subsidiary Company SX + 밥 80,000 (16,000) Eliminate the entry made by the parent during the current year to record its share of Company S income. Eliminate 80% of the January 1, 2017, subsidiary equity balances against the investment in Company S account. Distribute the excess of cost over book value and the NCI adjustment to the equipment account as specified by the determination and distribution of excess schedule applicable to the Investment in Company S. Amortize the excess of $100,000 for the past two years and the current year at the rate of $5,000 per year. The investment in Company P must be at cost. If any equity adjustments have been made, they must be reversed and the investment in the parent returned to cost. If the shares are to be reissued, as is the case in this example, the investment is then transferred to the treasury stock account, a contra account to total consolidated stockholders' equity. As an alternative to entry (TS), the cost of the treasury shares could be used to retire them on the worksheet as follows: Common Stock-Company P Retained Earnings Company P Investment in Company P. 0 60,000 0 50,000 30,000 80,000 26°C Mostly clear Q AA 462 0 X ENG 19:18 US 03/03/2023 > : /1142 >
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