Advanced Accounting
12th Edition
ISBN: 9781305084858
Author: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Publisher: Cengage Learning
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Chapter 5, Problem 5.2.2C
To determine
Introduction: Consolidation is a process in which financial statements of subsidiary is merged with financial statements of the parent. In this process, effect of intercompany transactions are eliminated.
To construct: The balance sheet and income statement in case, parent company purchases bonds of subsidiary from market.
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Midyear purchase of subsidiary’s bonds Sanur Corporation is a 90 percent subsidiary of Pare Corporation. On January 1, 2016, Sanur issued $1,000,000 par, 10 percent 5-year bonds with an unamortized premium of $50,000. On July 1, 2016, Pare Corporation purchased $400,000 par of the outstanding bonds of Sanur for $390,000. Straight-line amortization is used.
REQUIRED: Calculate the following:
1. The gain or loss on constructive retirement of the bonds
2. The consolidated bond interest expense for 2016
3. The consolidated bond liability at December 31, 2016
E 7-11
Consolidated income statement (constructive retirement of all subsidiary bonds)
Comparative income statements for Pam Corporation and its 80 percent-owned subsidiary, Sun
Corporation, for the year ended December 31, 2017, are summarized as follows:
Pam
Sun
Sales
$1,200,000
$600,000
Income from Sun
260,800
Bond interest income (Includes discount amortization)
91,000
(750,000)
(200,000)
Cost of sales
Operating expenses
Bond interest expense
(200,000)
(200,000)
(60,000)
$140,000
Net income
$ 601,800
Pam purchased its 80 percent interest in Sun at book value on January 1, 2016, when
Sun's assets and liabilities were equal to their fair values.
On January 1, 2017, Pam paid $783,000 to purchase all of Sun's $1,000,000, 6 percent
outstanding bonds. The bonds were issued at par on January 1, 2015, pay interest semiannually
on June 30 and December 31, and mature on December 31, 2023.
Required: Prepare a consolidated income statement for Pam Corporation and Subsidiary
for the year ended…
PROBLEM IV
On January 7, 2017, Rey Co. acquired a 40% interest in Joanne Co. for P4,800,000. Rey already held a 25% interest which had been
acquired for P1,600,000 but which was valued at P1,920,000 at January 7, 2017. The fair value of non-controlling interest (NCI) at
January 7, 2015 was P2,400,000, and the fair value of the identifiable net assets of Joanne Co. was P8,400,000. How much is the goodwill
to be recognized as a result of business combination?
Chapter 5 Solutions
Advanced Accounting
Ch. 5 - Prob. 1UTICh. 5 - Subsidiary Company S has $1000,000 of bonds...Ch. 5 - Plessor Industries acquired 80% of the outstanding...Ch. 5 - Company P purchased $100,000 of subsidiary Company...Ch. 5 - Prob. 5UTICh. 5 - Prob. 6UTICh. 5 - Prob. 7UTICh. 5 - Prob. 1ECh. 5 - Prob. 2ECh. 5 - Prob. 3.1E
Ch. 5 - Prob. 3.2ECh. 5 - Prob. 4ECh. 5 - Carlton Company is an 80%- owned subsidiary of...Ch. 5 - Carlton Company is an 80%- owned subsidiary of...Ch. 5 - Prob. 6.1ECh. 5 - Prob. 6.2ECh. 5 - Prob. 7.1ECh. 5 - Prob. 7.2ECh. 5 - Prob. 7.3ECh. 5 - Prob. 8.1ECh. 5 - Prob. 8.3ECh. 5 - Prob. 9ECh. 5 - Prob. 5.1.1PCh. 5 - Prob. 5.1.2PCh. 5 - Prob. 5.2PCh. 5 - Prob. 5.3PCh. 5 - Prob. 5.4PCh. 5 - Prob. 5.5PCh. 5 - Prob. 5.6PCh. 5 - Prob. 5.7PCh. 5 - Prob. 5.8.1PCh. 5 - Prob. 5.8.2PCh. 5 - Prob. 5.9PCh. 5 - Prob. 5.10PCh. 5 - Prob. 5.14PCh. 5 - Prob. 5.2.1CCh. 5 - Prob. 5.2.2CCh. 5 - Prob. 5.3.1CCh. 5 - Prob. 5.3.2CCh. 5 - Prob. 5.3.3CCh. 5 - Prob. 5.3.4C
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