Loose Leaf for Fundamentals of Advanced Accounting
Loose Leaf for Fundamentals of Advanced Accounting
7th Edition
ISBN: 9781260151879
Author: Hoyle, Joe Ben; Schaefer, Thomas; Doupnik, Timothy
Publisher: McGraw-Hill Education
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Chapter 6, Problem 45P

a.

To determine

Prepare consolidation worksheet adjustments for 2018.

a.

Expert Solution
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Explanation of Solution

Entry *TL
DateAccounts Title and ExplanationPost Ref.Debit ($)Credit ($)
  Investment in Company H          7,000 
  Land           7,000
  (Being intra-entity gain eliminated))   
     
 Entry *G
 Date Accounts Title and Explanation Post Ref. Debit ($) Credit ($)
  Retained earnings of Company H          8,000 
  Cost of goods sold           8,000
  (being opening unrealized gross profit eliminated)   
     
 Entry S
 Date Accounts Title and Explanation Post Ref. Debit ($) Credit ($)
  Common stock      100,000 
  Retained earnings on 01/01/2017      292,000 
  Investment in Company H       235,200
  Non controlling interest       156,800
  (being controlling and non-controlling interest recorded)   
     
 Entry A
 Date Accounts Title and Explanation Post Ref. Debit ($) Credit ($)
  Patents        75,000 
  Customer List      104,000 
  Investment in Company H       107,400
  Non controlling interest         71,600
  (being assets transferred to controlling and non-controlling interest)   
     
 Entry I
 Date Accounts Title and Explanation Post Ref. Debit ($) Credit ($)
  Investment income          3,000 
  Investment in Company H           3,000
  (being intra-entity equity income eliminated)   
     
 Entry D
 Date Accounts Title and Explanation Post Ref. Debit ($) Credit ($)
  Investment in Company H          2,400 
  Dividend expense           2,400
  (being intra-entity dividend expense eliminated)   
     
 Entry E
 Date Accounts Title and Explanation Post Ref. Debit ($) Credit ($)
  Amortization expense        20,500 
  Patents           7,500
  Customer List         13,000
  (being amortization expense of current year recorded)   
     
 Entry P
 Date Accounts Title and Explanation Post Ref. Debit ($) Credit ($)
  Accounts Payable        60,000 
  Accounts Receivable         60,000
  (being intra-entity receivables and payables eliminated)   
     
 Entry B
 Date Accounts Title and Explanation Post Ref. Debit ($) Credit ($)
  Bond payable        20,000 
  Premium on Bond payable          1,069 
  Interest Income          1,873 
  Investment in Bonds         19,005
  Interest expense           1,283
  Gain on retirement of Bonds           2,654
  (being the intra-entity bonds recognized)   
 Entry TI
 Date Accounts Title and Explanation Post Ref. Debit ($) Credit ($)
  Sales      120,000 
  Cost of goods sold       120,000
  (being intra-entity sale eliminated)   
     
 Entry G
 Date Accounts Title and Explanation Post Ref. Debit ($) Credit ($)
  Cost of goods sold          7,500 
  Inventory           7,500
  (being unrealized gross profit on ending inventory eliminated)   

Table: (1)

b.

To determine

Calculate the amount of consolidated net income attributable to the non-controlling interest for 2018. In addition, determine the ending 2018 balance for non-controlling interest in the consolidated balance sheet.

b.

Expert Solution
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Explanation of Solution

Computation of the amount of consolidated net income attributable to the non-controlling interest for 2018:

Particulars Amount
Net income reported by company H in 2018 $   25,000
Excess fair value amortizations $ (20,500)
Deferred gross profit recognized $     8,000
Unrecognized gross profit deferred $   (7,500)
Net income realized in 2018 $     5,000
Ownership of non-controlling interest40%
Net income attributable to non-controlling interest $     2,000

Table: (2)

Computation of the ending 2018 balance for non-controlling interest in the consolidated balance sheet:

Particulars Amount
 Non-controlling interest as on 01/01/2018 $ 228,400
Net income attributable to non-controlling interest $     2,000
Share of non-controlling interest in dividend $   (1,600)
Non-controlling interest as on 12/31/2018 $ 228,800

Table: (3)

c.

To determine

Determine the consolidation worksheet adjustments needed in 2019 in connection with the intra-entity bonds.

c.

Expert Solution
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Explanation of Solution

The consolidation worksheet adjustments needed in 2019 in connection with the intra-entity bonds:

Entry *B
DateAccounts Title and ExplanationPost Ref.Debit ($)Credit ($)
 12/31/2019Bond payable        20,000 
 Premium on Bond payable             733 
 Interest Income          1,901 
 Investment in Bonds           2,064
 Interest expense         19,306
 Gain on retirement of Bonds           1,264
 (being the intra-entity bonds eliminated)   

Table: (4)

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