Professional Documents
Culture Documents
8 Intercompany-Indebtedness
8 Intercompany-Indebtedness
CHAPTER 8
INTERCOMPANY INDEBTEDNESS
ANSWERS TO QUESTIONS
Q8-1 A gain or loss on bond retirement is reported by the consolidated entity whenever (a) one
of the companies purchases its own bonds from a nonaffiliate at an amount other than book
value, or (b) a company within the consolidated entity purchases the bonds of an affiliate from a
nonaffiliate at an amount other than book value.
Q8-2 A constructive retirement occurs when the bonds of a company included in the
consolidated entity are purchased by another company included within the consolidated entity.
Although the debtor still considers the bonds as outstanding, and the investor views the bonds
as an investment, they are constructively retired for consolidation purposes. If bonds are
actually retired, the debtor purchases its own bonds from a nonaffiliate and they are no longer
outstanding.
Q8-3 When bonds sold to an affiliate at par value are not eliminated, bonds payable and bond
investment are misstated in the balance sheet accounts and interest income and interest
expense are misstated in the income statement accounts. There is also a premium or discount
account to be eliminated when the bonds are not issued at par value. Unless interest is paid at
year-end, there is likely to be some amount of interest receivable and interest payable to be
eliminated as well.
Q8-4 Both the bond investment and interest income reported by the purchaser will be
improperly included. Interest expense, bonds payable, and any premium or discount recorded
on the books of the debtor also will be improperly included. In addition, the constructive gain or
loss on bond retirement will be omitted if no eliminating entries are recorded in connection with
the purchase.
Q8-5 If the focus is placed on the legal entity, only bonds actually reacquired by the debtor will
be treated as retired. This treatment can lead to incorrect reports for the consolidated entity in
two dimensions. If a company were to repurchase bonds from an affiliate, any retirement gain or
loss reported by the debtor is not a gain or loss to the economic entity and must be eliminated in
preparing consolidated statements. Moreover, although a purchase of debt of any of the other
companies in the consolidated entity will not be recognized as a retirement by the debtor, when
emphasis is placed on the economic entity the purchase must serve as a basis for recognition of
a bond retirement for the consolidated entity.
Q8-6 The difference in treatment is due to the effect of the transactions on the consolidated
entity. In the case of land sold to another affiliate, a gain has been recorded that is not a gain
from the viewpoint of the consolidated entity. Thus, it must be eliminated in the consolidation
process. On the other hand, in a bond repurchase the buyer simply records an investment in
bonds and the debtor makes no special entries because of the purchase by an affiliate. Neither
company records the effect of the transaction on the economic entity. Thus, in the consolidation
process an entry must be made to show the gain on bond retirement that has occurred from the
viewpoint of the economic entity.
8-1
Q8-7 When there has been a direct sale to an affiliate, the interest income recorded by the
purchaser should equal the interest expense recorded by the seller and the two items should
have no net effect on reported income. The eliminating entries do not change consolidated net
income in this case, but they will result in a more appropriate statement of the relevant income
and expense categories in the consolidated income statement.
Q8-8 Whenever a loss on bond retirement has been reported in a prior period, the affiliate that
purchased the bonds paid more than the book value of the debt shown by the debtor. As a
result, each period the interest income recorded by the buyer will be less than the interest
expense reported by the debtor. When the two income statement accounts are eliminated in the
consolidation process, the effect will be to increase consolidated net income. Because the full
amount of the loss was recognized for consolidated purposes in the year in which the bonds
were purchased by the affiliate, the effect of the elimination process in each of the periods that
follow should be to increase consolidated income.
Q8-9 The difference between the carrying value of the debt on the debtor's books and the
carrying value of the investment on the purchaser's books indicates the amount of unrecognized
gain or loss at the end of the period. To determine the amount of the gain or loss on retirement
at the start of the period, the difference between interest income recorded by the purchaser on
the bond that has been purchased and interest expense recorded by the debtor during the
period is added to the difference between carrying values at the end of the period.
Q8-10 Interest income and interest expense must be eliminated and a loss on bond retirement
established in the elimination process. Consolidated net income will decrease by the amount of
the loss. Because the loss is attributed to the subsidiary, income assigned to the controlling and
noncontrolling interests will decrease in proportion to their share of common stock held.
Q8-11 A constructive gain will be included in the consolidated income statement in this case
and both consolidated net income and income to the controlling interest will increase by the full
amount of the gain.
Q8-12 A direct placement of subsidiary bonds with the parent should have no effect on
consolidated income or on income assigned to the noncontrolling shareholders.
Q8-13 When subsidiary bonds are purchased from a nonaffiliate by the parent and there is a
constructive gain or loss for consolidated purposes, the gain or loss is assigned to the
subsidiary and included in computing income to the noncontrolling shareholders.
Q8-14 Interest income recorded by the subsidiary and interest expense recorded by the parent
should be equal in the direct placement case. When the subsidiary purchases parent company
bonds from a nonaffiliate, interest income and interest expense will not be the same unless the
bonds are purchased from the nonaffiliate at an amount equal to the liability reported by the
parent.
Q8-15 A gain on constructive bond retirement recorded in a prior period means the bonds were
purchased for less than book value and the interest income recorded by the subsidiary each
period will be greater than the interest expense recorded by the parent. Consolidated net
income for the current period will decrease by the difference between interest income and
interest expense as these amounts are eliminated in preparing the consolidated statements.
Income to the noncontrolling interest will be unaffected since the constructive gain is assigned
to parent company.
8-2
Q8-16 A constructive loss recorded on the subsidiary's bonds in a prior period means the
interest income recorded by the parent is less than the interest expense recorded by the
subsidiary in each of the following periods. Consolidated net income will increase when interest
income and expense are eliminated. Income assigned to the noncontrolling interest will be
based on the reported net income of the subsidiary plus the difference between interest income
and interest expense each period following the retirement. As a result, the amount assigned will
be greater than if the bond had not been constructively retired.
Q8-17 On the date the parent sells the bonds to a nonaffiliate they are issued for the first time
from a consolidated perspective. While the parent will record a gain or loss on sale of the bonds
on its books, none is recognized from a consolidated viewpoint. The difference between the sale
price received by the parent and par value is a premium or discount. Each period there will be a
need to establish the correct amount for the premium or discount account and to adjust interest
expense recorded by the subsidiary to bring the reported amounts into conformity with the sale
price to the nonaffiliate.
Q8-18 The retirement gain or loss reported by the subsidiary when it repurchases the bonds
held by the parent must be eliminated in the consolidation process. From the viewpoint of the
consolidated entity the bonds were retired at the point they were purchased by the parent and a
gain or loss should have been recognized at that point.
8-3
SOLUTIONS TO CASES
C8-1 Recognition of Retirement Gains and Losses
a. When Flood purchases the bonds it establishes an investment account on its books and
Bradley establishes a bond liability and discount account on its books. No entry is made by
Century. When Century purchases the bonds, Century records an investment and Flood
removes the balance in the investment account and records a gain on the sale. Bradley makes
no entry. When Bradley retires the issue, Bradley removes its liability and unamortized discount
and records a loss on bond retirement. Century removes the bond investment account and
records a loss on the sale of bonds. Flood makes no entry.
b. A constructive loss on bond retirement is reported by the consolidated entity at the time
Century purchases the bonds from Flood. The exact amount of the loss cannot be ascertained
without knowing the maturity date of the bonds, the date of initial sale, and the date of purchase
by Century.
c. The initial sale of bonds by Bradley is treated as a normal transaction with no need for an
adjustment to income assigned to the noncontrolling shareholders. Income assigned to
noncontrolling shareholders will be reduced by a proportionate share of the loss reported in the
consolidated income statement in the period in which Century purchases the bonds from Flood.
In the years before the bonds are retired by Bradley, income assigned to the noncontrolling
interest (assuming no differential) will be greater than a pro rata portion of the reported net
income of Bradley. In the period in which the bonds are retired by Bradley, reported net income
of Bradley must be adjusted to remove its loss on bond retirement before assigning income to
the noncontrolling interest. No adjustment is made in the years following the repurchase by
Bradley.
8-4
President
Hydro Corporation
From:
Re:
, Accounting Staff
Consolidation of Joint Venture
Hydro Corporation and Rich Corner Bank established a joint venture which borrowed
$30,000,000 and built a new production facility. That facility is now leased to Hydro on a 10-year
operating lease. Hydro currently reports the annual lease payment as an operating expense and
in the notes to its financial statements must report a contingent liability for its guarantee of the
debt of the joint venture. I have been asked to review the current financial reporting standards
and determine whether Hydros current reporting is appropriate.
The circumstances surrounding the creation of the joint venture and the lease arrangement with
Hydro appear to point to the need for Hydro to consolidate the joint venture with its own
operations. Although Rich Corner Bank holds 100 percent of the equity of the joint venture, it
has contributed less than 1 percent of the total assets of the joint venture ($200,000 of equity
versus $30,000,000 of total borrowings). Under normal circumstances, less than a 10 percent
investment in the entitys total assets is considered insufficient to permit the entity to finance its
activities. [FIN 46R, Par 9; ASC 810-10-25-45]
In this situation, Hydro has guaranteed the $30,000,000 borrowed by the joint venture and has
guaranteed a 20 percent annual return on the equity investment of Rich Corner Bank. These
conditions will result in Hydro Corporation absorbing any losses incurred by the joint venture
and establish Hydro Corporation as the primary beneficiary of the entity. The FASB requires
consolidation by the entity that will absorb a majority of the entitys expected losses if they
occur. [FIN 46R, Par. 14; ASC 810-10-25-38]
Consolidation of the joint venture will result in including the production facility among Hydros
assets and the debt as part of its long-term liabilities. The claim on the net assets of the joint
venture held by Rich Corner Bank will be reported as part of noncontrolling interest. Hydros
consolidated income statement will not include the lease payment as an operating expense, but
will include depreciation expense on the production facility and interest expense for the interest
payment made on the borrowing of the joint venture.
Primary citation:
FASB INT. 46 (ASC 810)
8-5
Financial Vice-President
Farflung Corporation
, Accounting Staff
Investment in Bonds Issued by Subsidiary
The consolidated financial statements of Farflung Corporation should include both Micro
Company and Eagle Corporation. The purpose of the consolidated statements is to present the
financial position and results of operations for a parent and one or more subsidiaries as if the
individual entities actually were a single company or entity. [ARB 51, Par. 1; ASC 810-10-10-1]
When one subsidiary purchases the bonds of another, the investment reported by the
purchasing affiliate and the liability reported by the debtor must be eliminated and a gain or loss
reported on the difference between the purchase price and the carrying value of the debt at the
time of purchase.
In preparing Farflungs consolidated statements at December 31, 20X4, the following eliminating
entry should have been included in the worksheet:
Bonds Payable
Loss on Bond Retirement
Investment in Micro Company Bonds
400,000
24,000
424,000
The $24,000 loss should have been included in the consolidated income statement, leading to a
reduction of $15,600 ($24,000 x 0.65) in income assigned to the controlling interest and a
reduction of $8,400 ($24,000 x 0.35) in income assigned to noncontrolling shareholders. This
error should be corrected by restating the financial statements of the consolidated entity for
20X4.
While omission of the eliminating entry resulted in incorrect financial statements for the
consolidated entity, it should have no impact on the financial statements of the individual
subsidiaries. Assuming (1) the bonds had 15 years remaining until maturity when purchased by
Eagle and pay 8 percent interest annually, (2) straight-line amortization of the premium paid by
Eagle is appropriate, and (3) the consolidated financial statements as of December 31, 20X4,
are corrected, the eliminating entry at December 31, 20X5, is:
Bonds Payable
Interest Income
Investment in Micro Company
Noncontrolling Interest
Investment in Micro Company Bonds
Interest Expense
(a) ($400,000 x 0.08) - ($24,000/15 years)
(b) $424,000 - ($24,000/15 years)
(c) $400,000 x 0.08
Primary citation:
ARB 51, Par. 6; ASC 810-10-45-1
8-6
400,000
30,400 (a)
15,600
8,400
422,400(
b)
32,000(c)
8-7
SOLUTIONS TO EXERCISES
E8-1 Bond Sale from Parent to Subsidiary
a.
January 1, 20X2
Investment in Lamar Corporation Bonds
Cash
July 1, 20X2
Cash
Interest Income
Investment in Lamar Corporation Bonds
156,000
4,500
156,000
4,200
300
4,500
January 1, 20X2
Cash
Bonds Payable
Bond Premium
156,000
July 1, 20X2
Interest Expense
Bond Premium
Cash
4,200
300
4,200
300
c.
4,200
300
150,000
6,000
4,500
4,500
8-8
150,000
5,400
8,400
4,500
155,400
8,400
4,500
b.
c.
Eliminating entries:
Bonds Payable
Bond Premium
Interest Income
Investment in Nettle Corporation Bonds
Interest Expense
Interest Payable
Interest Receivable
100,000
3,500
11,500
6,000
103,500
11,500
6,000
b.
January 1, 20X4
Cash
Interest Receivable
16,000
July 1, 20X4
Cash
Investment in Carter Company Bonds
Interest Income
$800 = ($400,000 - $392,000)/(5 x 2)
December 31, 20X4
Interest Receivable
Investment in Carter Company Bonds
Interest Income
c.
16,000
800
16,000
800
16,000
16,800
16,800
400,000
33,600
16,000
8-9
395,200
4,800
33,600
16,000
The bonds were originally sold at a discount. Stellar purchased the bonds at par value and
a constructive loss was reported.
b.
The annual interest payment received by Stellar will be less than the interest expense
recorded by the subsidiary. When bonds are sold at a discount, the issue price of the
bonds is adjusted downward because the annual interest payment is less than is needed to
issue the bonds at par value.
c.
In 20X6, consolidated net income was decreased as a result of the loss on constructive
retirement of bonds. Each period following the purchase, the amount of interest expense
recorded by the subsidiary will exceed the interest income recorded by the parent. When
these two amounts are eliminated, consolidated net income will be increased. Thus,
consolidated net income for 20X7 will be increased.
A constructive gain of $100,000 is included in consolidated net income for the period
ended March 31, 20X8, and consolidated retained earnings at March 31, 20X8.
Because the bonds of the parent are constructively retired, there is no effect on the
amounts assigned to the noncontrolling interest. [AICPA Adapted]
2.
The loss on bond retirement will result in a reduction in consolidated retained earnings.
[AICPA Adapted]
3.
4.
5.
6.
$40,000
20,000
$60,000
(5,600)
700
$55,100
8-10
2.
3.
$30,000
10,500
$40,500
x
.20
$ 8,100
b.
400,000
9,000
18,000
397,000
12,000
18,000
400,000
8,400
36,200
18,000
8-11
397,200
35,400
7,200
4,800
18,000
8-12
b.
18,000
18,000
400,000
8,400
36,200
18,000
8-13
397,200
35,400
7,200
4,800
18,000
297,120
21,450
5,400
$291,000
3,150
$294,150
100,000
8,000
12,000
5,000
8-14
106,000
3,000
11,000
5,000
$200,000
x
.12
$ 24,000
b.
$115,000
(8,000)
$107,000
(100,000)
$ 7,000
c.
(6,000)
$ 18,000
(3,000)
$ 15,000
100,000
6,000
4,000
6,000
8-15
100,000
3,000
7,000
6,000
b.
c.
5,200
$205,200
(192,200)
$ 13,000
d.
$200,000
$ 13,000
$(11,600)
10,600
(1,000)
$ 12,000
8-16
200,000
4,800
11,600
11,000
192,800
10,600
13,000
11,000
E8-12 (continued)
e.
f.
200,000
4,000
23,200
Interest Payable
Interest Receivable
Eliminate intercompany receivable/payable.
11,000
194,000
21,200
8,400
3,600
11,000
8-17
$ 50,000
$(23,200)
21,200
(2,000)
$ 48,000
x
.30
$ 14,400
b.
6,000
104,200
11,500
6,000
c.
100,000
3,000
11,300
1,400
$ 20,000
(1,400)
$11,500
(11,300)
200
$ 18,800
x 0.35
$ 6,580
8-18
100,000
2,500
11,300
780
420
6,000
103,500
11,500
6,000
SOLUTIONS TO PROBLEMS
P8-14 Consolidation Worksheet with Sale of Bonds to Subsidiary
a.
b.
6,000
18,000
18,000
c.
6,000
6,400
8-19
6,400
6,000
400
P8-14 (continued)
d.
Book Value Calculations:
NCI
40%
60,000
12,000
(4,000)
68,000
Porter Co.
60%
90,000
18,000
(6,000)
102,000
Common
Stock
100,000
100,000
100,000
50,000
18,000
12,000
10,000
102,000
68,000
80,000
1,200
6,000
81,200
6,000
8-20
Retained
Earnings
50,000
30,000
(10,000)
70,000
P8-14 (continued)
e.
Income Statement
Sales
Interest Income
Less: COGS
Less: Depreciation Expense
Less: Interest Expenses
Income from Temple Co.
Consolidated Net Income
NCI in Net Income
Controlling Interest in Net Income
Statement of Retained Earnings
Beginning Balance
Net Income
Less: Dividends Declared
Ending Balance
Balance Sheet
Cash and Accounts Receivable
Inventory
Buildings & Equipment
Less: Accumulated Depreciation
Investment in Porter Co.Bonds
Investment in Temple Co.
Total Assets
Accounts Payable
Bonds Payable
Bond Premium
Common Stock
Retained Earnings
NCI in NA of Temple Co.
Total Liabilities & Equity
Porter
Co.
Temple
Co.
200,000
114,000
6,000
(61,000)
(15,000)
(14,000)
(99,800)
(25,000)
(6,000)
18,000
87,200
30,000
87,200
30,000
230,000
87,200
(40,000)
277,200
50,000
30,000
(10,000)
70,000
80,200
120,000
500,000
(175,000)
40,000
65,000
300,000
(75,000)
81,200
102,000
627,200
411,200
Elimination Entries
DR
CR
314,000
6,000
6,000
(160,800)
(40,000)
(14,000)
0
99,200
(12,000)
87,200
6,000
10,000
16,000
230,000
87,200
(40,000)
277,200
6,000
18,000
24,000
12,000
36,000
50,000
36,000
86,000
6,000
120,200
185,000
800,000
(250,000)
0
68,800
80,000
1,200
200,000
277,200
41,200
200,000
100,000
70,000
80,000
1,200
100,000
86,000
627,200
411,200
267,200
8-21
Consolidated
81,200
102,000
183,200
0
855,200
110,000
200,000
16,000
68,000
84,000
200,000
277,200
68,000
855,200
b.
18,000
22,500
18,000
22,500
c.
5,200
800
d.
Book Value Calculations:
NCI
10%
13,000
2,500
(2,000)
13,500
Mega
Corp.
90%
117,000
22,500
(18,000)
121,500
Common
Stock
80,000
80,000
80,000
50,000
22,500
2,500
20,000
121,500
13,500
100,000
1,600
5,200
101,600
5,200
8-22
Retained
Earnings
50,000
25,000
(20,000)
55,000
6,000
P8-15 (continued)
e.
Income Statement
Sales
Interest Income
Less: COGS
Less: Depreciation Expense
Less: Interest Expenses
Income from Tarp Co.
Consolidated Net Income
NCI in Net Income
Controlling Interest in Net Income
Statement of Retained Earnings
Beginning Balance
Net Income
Less: Dividends Declared
Ending Balance
Balance Sheet
Cash and Accounts Receivable
Inventory
Buildings & Equipment
Less: Accumulated Depreciation
Investment in Tarp Co.Bonds
Investment in Tarp Co.
Total Assets
Current Payables
Bonds Payable
Bond Premium
Common Stock
Retained Earnings
NCI in NA of Tarp Co.
Total Liabilities & Equity
Elimination Entries
DR
CR
Mega
Corp.
Tarp
Co.
140,000
5,200
(86,000)
(20,000)
(16,000)
22,500
45,700
125,000
(79,800)
(15,000)
(5,200)
45,700
25,000
242,000
45,700
(30,000)
257,700
50,000
25,000
(20,000)
55,000
22,000
165,000
400,000
(140,000)
101,600
121,500
670,100
36,600
75,000
240,000
(80,000)
271,600
92,400
200,000
120,000
257,700
35,000
100,000
1,600
80,000
55,000
100,000
1,600
80,000
80,200
670,100
271,600
261,800
8-23
Consolidated
265,000
5,200
25,000
5,200
(165,800)
(35,000)
(16,000)
0
48,200
(2,500)
45,700
5,200
20,000
25,200
242,000
45,700
(30,000)
257,700
5,200
22,500
27,700
2,500
30,200
50,000
30,200
80,200
5,200
58,600
240,000
640,000
(220,000)
101,600
121,500
223,100
0
718,600
127,400
200,000
25,200
13,500
38,700
120,000
257,700
13,500
718,600
January 1, 20X3
Cash
Interest Receivable
Receive interest on bond investment.
2,000
2,000
July 1, 20X3
Cash
Investment in Vincent Company Bonds
Interest Income
Record receipt of bond interest: $250 = $5,000 /
(10 years x 2)
2,000
250
2,000
250
2,250
7,000
2,250
21,000
4,000
July 1, 20X3
Interest Expense
4,500
Discount on Bonds Payable
500
Cash
4,000
Semiannual payment of interest: $500 = $10,000 / 20 semiannual
payments
December 31, 20X3
Interest Expense
Discount on Bonds Payable
Interest Payable (Current Liabilities)
Accrue interest expense at year-end.
8-24
4,500
500
4,000
P8-16 (continued)
c.
Book Value Calculations:
NCI
30%
Original book value
45,000
+ Net Income
9,000
- Dividends
(3,000)
Ending book value
51,000
Fern Corp.
70%
105,000
21,000
(7,000)
119,000
Common
Stock
50,000
50,000
Retained
Earnings
100,000
30,000
(10,000)
120,000
50,000
100,000
21,000
9,000
10,000
119,000
51,000
Buildings and
Equipment
56,000
56,000
4,000
2,800
1,200
56,000
12,000
30,800
13,200
5,600
2,400
8,000
50,000
4,500
46,500
4,500
3,500
Interest Payable
Interest Receivable
2,000
2,000
8-25
Acc. Depr.
(8,000)
(4,000)
(12,000)
P8-16 (continued)
d.
Fern
Corp.
Vincent
Co.
300,000
4,500
(198,500)
(27,000)
18,200
97,200
200,000
(161,000)
(9,000)
30,000
97,200
Income Statement
Sales
Interest income
Less: Other Expenses
Less: Interest Expense
Income from Vincent Co.
Consolidated Net Income
NCI in Net Income
Controlling Interest in Net
Income
Elimination Entries
DR
CR
Consolidated
21,000
29,500
9,000
4,500
2,800
7,300
1,200
500,000
0
(363,500)
(31,500)
0
105,000
(7,800)
30,000
38,500
8,500
97,200
238,800
97,200
(60,000)
276,000
100,000
30,000
(10,000)
120,000
100,000
38,500
8,500
10,000
18,500
238,800
97,200
(60,000)
276,000
Balance Sheet
Cash & Current Receivables
Inventory
Land, Buildings, & Equipment (net)
30,300
170,000
320,000
46,000
70,000
180,000
144,200
46,500
711,000
Current Liabilities
Bonds Payable
Discount on Bonds Payable
Common Stock
Retained Earnings
NCI in NA of Vincent Co.
35,000
300,000
4,500
4,000
138,500
2,000
56,000
5,600
296,000
61,600
2,000
50,000
100,000
276,000
33,000
100,000
(7,000)
50,000
120,000
711,000
296,000
8-26
12,000
8,000
119,000
30,800
46,500
218,300
3,500
50,000
138,500
2,400
242,900
18,500
51,000
13,200
86,200
74,300
240,000
536,000
0
0
850,300
66,000
350,000
(3,500)
100,000
276,000
61,800
850,300
b.
c.
d.
$198,200
(1,500)
$196,700
e.
$200,000
4,400
$204,400
(196,700)
$ 7,700
Consolidated net income for 20X7 after adjustment for bond retirement:
Amount reported without adjustment
Adjustment for excess of interest income
over interest expense:
Interest income
Income expense
$ 70,000
$(18,600)
17,200
g.
8-27
200,000
1,600
18,600
(1,400)
$ 68,600
198,800
17,200
3,150
1,050
$102,400
400
$102,800
b.
Interest Expense
9,500
Discount on Bonds Payable
500
Cash
9,000
Annual payment of interest: $9,500 = [$9,000 + ($3,000 / 6 years)]
c.
Cash
9,000
Investment in Broadway Company Bonds
Interest Income
Annual receipt of interest: $8,600 = [$9,000 - ($2,400 / 6 years)]
d.
Bonds Payable
100,000
Loss on Bond Retirement
6,300
Investment in Broadway Company Bonds
Discount on Bonds Payable
Eliminate intercorporate bond holdings:
$6,300 = $102,800 - [$97,000 -($3,000 / 6 years)]
$102,800 = computed above
$3,500 = [$3,000 + ($3,000 / 6 years)]
e.
400
8,600
102,800
3,500
Consolidated net Income and income to controlling interest for 20X5 and 20X6:
Operating income reported by Amazing
Net income reported by Broadway
Loss on bond retirement
Adjustment for excess of interest expense
($9,500) over interest income ($8,600)
Consolidated net income
Income to noncontrolling interest:
($60,000 - $6,300) x 0.15
($80,000 + $900) x 0.15
Income to controlling interest
8-28
20X5
20X6
$120,000 $150,000
60,000
80,000
(6,300)
$173,700
(8,055)
$165,645
900
$230,900
(12,135)
$218,765
9,000
1,500
$ 10,500
100,000
$110,500
6,000
1,000
$ 7,000
100,000
$107,000
$ 30,000
500
$ 30,500
x
0.30
$ 9,150
8-29
$11,000
(10,500)
$ 500
NCI
20%
41,000
15,000
(2,000)
54,000
Bath
Corp.
80%
164,000
60,000
(8,000)
216,000
Common
Stock
100,000
100,000
Retained
Earnings
105,000
75,000
(10,000)
170,000
Reversal/Deferred GP Calculations:
Downstream Deferred GP
Upstream Deferred GP
Total
Total
(12,000)
(6,000)
(18,000)
Bath
Corp.'s
share
(12,000)
(4,800)
(16,800)
100,000
105,000
43,200
13,800
NCI's share
(1,200)
(1,200)
10,000
199,200
52,800
8-30
P8-20 (continued)
20X4 Downstream Transactions
=
Re-sold
58,000
Ending
Inventory
42,000
Sales
Total
100,000
COGS
71,429
41,429
30,000
Gross Profit
Gross Profit %
28,571
28.57%
16,571
12,000
Re-sold
24,000
Ending
Inventory
26,000
Sales
Total
50,000
COGS
38,462
18,462
20,000
Gross Profit
Gross Profit %
11,538
23.08%
5,538
6,000
101,500
8,400
2,100
4,000
4,000
8-31
P8-20 (continued)
b.
Balance Sheet
Cash and Receivables
Inventory
Buildings & Equipment (net)
Investment in Stang Co.
Bonds
Investment in Stang Co.
Stock
Bath
Corp.
Stang
Co.
Elimination Entries
DR
CR
122,500
200,000
320,000
124,000
150,000
360,000
4,000
18,000
242,500
332,000
680,000
101,500
101,500
207,600
199,200
8,400
331,100
Total Assets
951,600
634,000
Accounts Payable
Bonds Payable
Premium on Bonds Payable
Common Stock
Retained Earnings
40,000
400,000
28,000
300,000
36,000
100,000
170,000
4,000
100,000
12,000
100,000
105,000
43,200
13,800
150,000
200,000
311,600
c.
951,600
634,000
528,000
Consolidated
64,000
600,000
24,000
200,000
311,600
10,000
132,000
52,800
2,100
196,900
$ 242,500
332,000
680,000
$1,254,500
Accounts Payable
Bonds Payable
Bond Premium
Stockholders Equity:
Controlling Interest:
Common Stock
Retained Earnings
Total Controlling interest
Noncontrolling Interest
Total Stockholders Equity
Total Liabilities and Stockholders
Equity
8-32
$600,000
24,000
$200,000
311,600
$511,600
54,900
1,254,500
64,000
624,000
566,500
$1,254,500
54,900
1,254,500
b.
c.
$105,600
$800
x 0.75
600
$106,200
$107,000
750
$107,750
(106,200)
$ 1,550
100,000
7,000
6,900
$10,000
(800)
$ 9,200
x 0.75
$ 6,900
$10,000
(1,000)
$ 9,000
x 0.75
$ 6,750
5,000
8-33
105,600
6,750
1,550
5,000
$111,250
7,500
$118,750
x
0.40
$47,500
c.
d.
$42,400
1,600
560
40,000
4,500
3,200
(44,000)
$ 3,500
560
42,400
2,500
2,240
560
$501,680
8-34
Reversal/Deferred GP Calculations:
Total
=
Constructive Gain
7,000
Extra Depreciation
400
Total
7,400
Retained
Earnings
50,000
30,000
(10,000)
70,000
100,000
Retained earnings
50,000
22,440
14,960
Dividends declared
Investment in Brown Corp.
NCI in NA of Brown Corp.
Lofton Co.
Temple Corp.
Equipment
30,000
10,000
40,000
106,440
70,960
Accumulated
Depreciation
4,000
400
15,600
19,200
Actual
"As If"
400
400
50,000
7,000
50,000
7,000
8-35
P8-23 (continued)
Income Statement
Sales
Gain on Bond
Retirement
Less: Interest Expense
Less: Operating
Expenses
Income from Brown
Corp.
Consolidated Net
Income
NCI in Net Income
Controlling Interest in
Net Income
Tyler
Brown
Corp.
400,000
200,000
(20,000)
(20,000)
(302,200)
(150,000)
22,440
Investment in Brown
Corp. Bonds
Investment in Brown
Corp. Stock
Total Assets
Accounts Payable
Bonds Payable
Bond Premium
Common Stock
Retained Earnings
NCI in NA of Brown Co.
Total Liab. & Equity
Consolidated
600,000
7,000
7,000
(40,000)
400
(451,800)
22,440
100,240
30,000
22,440
14,960
7,400
115,200
(14,960)
100,240
30,000
37,400
7,400
100,240
50,000
30,000
50,000
37,400
7,400
146,640
100,240
(10,000)
70,000
87,400
10,000
17,400
(40,000)
206,880
Elimination Entries
DR
CR
68,000
100,000
120,000
55,000
75,000
110,000
360,000
210,000
123,000
175,000
230,000
400
10,000
50,000
103,080
801,080
94,200
200,000
450,000
300,000
206,880
52,000
200,000
28,000
100,000
70,000
801,080
450,000
8-36
3,360
13,760
50,000
7,000
100,000
87,400
2,240
246,640
15,600
564,800
50,000
106,440
172,040
0
1,092,800
17,400
70,960
88,360
146,200
350,000
21,000
300,000
206,880
68,720
1,092,800
P8-23 (continued)
b.
Cash
Accounts Receivable
Inventory
Total Current Assets
Depreciable Assets (net)
Total Assets
$ 123,000
175,000
230,000
$ 528,000
564,800
$1,092,800
Accounts Payable
Bonds Payable
Bond Premium
Stockholders Equity:
Controlling Interest:
Common Stock
Retained Earnings
Total Controlling Interest
Noncontrolling Interest
Total Stockholders Equity
Total Liabilities and Stockholders' Equity
$350,000
21,000
$300,000
206,880
$506,880
68,720
$ 146,200
371,000
575,600
$1,092,800
$ 40,000
451,800
$600,000
7,000
$607,000
(491,800)
$115,200
(14,960)
$100,240
$146,640
100,240
$246,880
(40,000)
$206,880
8-37
NCI
40%
68,000
20,000
(4,000)
84,000
Bennett
Corp.
60%
102,000
30,000
(6,000)
126,000
Common
Stock
100,000
100,000
Retained
Earnings
70,000
50,000
(10,000)
110,000
100,000
70,000
30,600
20,400
10,000
126,600
84,400
$50,000
$106,000
100,000)
$
6,000
6*
1,000
$51,000
x 0.40
$20,400
$9,000
8,000
$1,000
Total premium
6,000
Yearly amortization
1,000
Years:
6 years
8-38
P8-24 (continued)
Bond Elimination Entry:
Bonds Payable
Investment in Stone Cont. Stock.
NCI in NA of Stone Cont. Co.
Interest Income
Investment in Stone Cont. Bonds
Interest Expense
100,000
4,200
2,800
8,000
106,000
9,000
Bennett
Corp.
Income Statement
Sales
Interest Income
Less: Interest Expense
Less: Other Expenses
Income from Stone Cont. Co.
Consolidated Net Income
NCI in Net Income
Controlling Interest in Net Income
Stone
Cont.
Co.
450,000
8,000
(20,000)
(368,600)
30,600
100,000
(18,000)
(182,000)
100,000
50,000
210,000
100,000
(40,000)
270,000
70,000
50,000
(10,000)
110,000
Balance Sheet
Cash
Accounts Receivable
Inventory
Other Assets
Investment in Stone Cont. Co. Bonds
Investment in Stone Cont. Co. Stock
Total Assets
61,600
100,000
120,000
340,000
106,000
122,400
850,000
20,000
80,000
110,000
250,000
80,000
200,000
300,000
270,000
50,000
200,000
100,000
110,000
850,000
460,000
Accounts Payable
Bonds Payable
Common Stock
Retained Earnings
NCI in NA of Stone Cont. Co.
Total Liabilities & Equity
8-39
Elimination Entries
DR
CR
250,000
9,000
700,000
0
(29,000)
(550,600)
0
120,400
(20,400)
100,000
9,000
10,000
19,000
210,000
100,000
(40,000)
270,000
106,000
126,600
232,600
81,600
180,000
230,000
590,000
0
0
1,081,600
19,000
84,400
103,400
130,000
300,000
300,000
270,000
81,600
1,081,600
8,000
50,000
460,000
9,000
30,600
38,600
20,400
59,000
70,000
59,000
129,000
4,200
4,200
100,000
100,000
129,000
2,800
331,800
Consolidated
9,000
P8-24 (continued)
b.
Cash
Accounts Receivable
Inventory
Total Current Assets
Other Assets
Total Asset
81,600
180,000
230,000
$ 491,600
590,000
$1,081,600
Accounts Payable
Bonds Payable
Stockholders Equity:
Controlling Interest:
Common Stock
Retained Earnings
Total Controlling Interest
Noncontrolling Interest
Total Stockholders Equity
Total Liabilities and Stockholders Equity
$ 130,000
300,000
$300,000
270,000
$570,000
81,600
651,600
$1,081,600
$ 29,000
550,600
$700,000
(579,600)
$120,400
(20,400)
$100,000
$210,000
100,000
$310,000
(40,000)
$270,000
8-40
b.
$620,000
240,000
(15,000)
$40,000
33,000
$73,000
(22,000)
c.
(51,000)
$794,000
$167,000
120,000
$287,000
(9,000)
$278,000
15,200
800
8-41
16,000
$200,000
x
0.08
$ 16,000
(800)
$ 15,200
P8-25 (continued)
d.
6,400
200
$6,400
200
$6,600
$50,000
170,000
48,000
(24,000)
4,160
(1,040)
$247,120
x 0.25
$61,780
6
Amortization per year
$ 800
Years to maturity at purchase
x
8
Premium, December 31, 20X5
Book value of bonds
Proportion purchased
Book value of bonds purchased
Purchase price
Constructive gain
8-42
6,600
$48,000
15,000
(520)
$62,480
x 0.25
$15,620
$200,000
6,400
$206,400
x
0.40
$ 82,560
(78,400)
$ 4,160
P8-25 (continued)
f.
Book Value Calculations:
NCI
25%
55,000
12,000
(6,000)
61,000
Lance
Corp.
75%
165,000
36,000
(18,000)
183,000
Common
Stock
50,000
50,000
Retained
Earnings
170,000
48,000
(24,000)
194,000
Reversal/Deferred GP Calculations:
Upstream Reversal
Downstream Deferred GP
Amortization of Constructive Gain
Total
Total
15,000
(9,000)
(520)
5,480
50,000
170,000
37,860
15,620
Lance Corp.'s
share
11,250
(9,000)
(390)
1,860
NCI's share
3,750
(130)
3,620
24,000
184,860
64,620
11,250
3,750
15,000
8-43
P8-25 (continued)
20X7 Downstream Transactions
Sales
COGS
Gross Profit
Gross Profit %
Total
60,000
40,000
20,000
33.33%
Re-sold
33,000
22,000
11,000
Ending
Inventory
27,000
18,000
9,000
80,000
1,920
6,600
78,800
6,080
2,730
910
8-44
P8-25 (continued)
g.
Income Statement
Sales
Interest and Other Income
Less: COGS
Less: Depreciation Expense
Less: Interest and Other Expenses
Income from Avery Co.
Consolidated Net Income
NCI in Net Income
Controlling Interest in Net Income
Statement of Retained Earnings
Beginning Balance
Net Income
Less: Dividends Declared
Ending Balance
Balance Sheet
Cash
Accounts Receivable
Other Receivables
Inventory
Land
Buildings & Equipment
Less: Accumulated Depreciation
Investment in Avery Co. Bonds
Investment in Avery Co. Stock
Total Assets
Accounts Payable
Other Payables
Bonds Payable
Bond Premium
Common Stock
Additional Paid-in Capital
Retained Earnings
NCI in NA of Avery Co.
Total Liabilities & Equity
Lance
Corp.
Avery
Co.
750,000
16,000
(620,000)
320,000
5,000
(240,000)
(45,000)
(35,000)
37,860
103,860
(15,000)
(22,000)
103,860
48,000
283,180
103,860
(50,000)
337,040
170,000
48,000
(24,000)
194,000
37,900
110,000
30,000
167,000
90,000
500,000
(155,000)
78,800
176,340
48,800
105,000
15,000
120,000
40,000
250,000
(75,000)
1,035,04
0
118,000
40,000
250,000
250,000
40,000
337,040
1,035,04
0
8-45
48,000
503,800
35,000
20,000
200,000
4,800
50,000
Elimination Entries
DR
CR
60,000
6,600
15,000
51,000
170,000
120,080
290,080
1,010,000
14,400
(794,000)
72,080
(60,000)
(50,920)
0
119,480
(15,620)
103,860
72,080
24,000
96,080
283,180
103,860
(50,000)
337,040
6,080
37,860
104,460
15,620
120,080
Consolidated
72,080
9,000
11,250
78,800
184,860
2,730
9,000
80,000
1,920
50,000
194,000
290,080
3,750
96,080
64,620
910
503,800
422,000
160,700
86,700
215,000
45,000
278,000
130,000
750,000
(230,000)
0
0
1,274,700
153,000
60,000
370,000
2,880
250,000
40,000
337,040
61,780
1,274,700
NCI
25%
50,000
7,500
(2,500)
55,000
Pond
Corp.
75%
150,000
22,500
(7,500)
165,000
Common
Stock
50,000
50,000
Retained
Earnings
150,000
30,000
(10,000)
170,000
Reversal/Deferred GP Calculations:
Downstream Extra Depreciation
Amortization of Constr. Loss
Total
Basic elimination entry
Common stock
Additional Paid-in Capital
Retained earnings
Income from Skate Co.
NCI in NI of Skate Co.
Dividends declared
Investment in Skate Co.
NCI in NA of Skate Co.
Skate Co.
Pond
Corp.
Building
65,000
60,000
125,000
Total
1,500
600
2,100
Pond Corp.'s
share
1,500
450
1,950
30,000
20,000
150,000
24,450
7,650
10,000
166,950
55,150
Actual
As if
80,000
Accumulated
Depreciation
Depreciation Expense
Eliminate the gain on land:
Investment in Skate Co.
NCI in NA of Skate Co.
15,000
60,000
75,000
1,500
1,500
9,750
3,250
8-46
NCI's share
150
150
Accumulated
Depreciation
6,500
1,500 75,000
Land
13,000
8-47
P8-26 (continued)
Bond Elimination Entry:
Bonds Payable
40,000
Interest Income
3,600
Investment in Skate Co. Stock
3,150
NCI in NA of Skate co.
1,050
Investment in Skate Co. Bonds
Interest Expense
Bond Discount
Debt Elimination Entry:
Interest Payable
Interest Receivable
42,400
4,200
1,200
2,000
2,000
P8-26 (continued)
b.
Income Statement
Sales
Interest Income
Less: COGS
Less: Depreciation Expense
Less: Other Operating
Expenses
Less: Interest Expense
Less: Miscellaneous Expense
Income from Skate Co.
Consolidated Net Income
NCI in Net Income
Controlling Interest in NI
Statement of Retained Earnings
Beginning Balance
Net Income
Less: Dividends Declared
Ending Balance
Balance Sheet
Cash
Accounts Receivable
Interest and Other
Receivables
Inventory
Land
Buildings & Equipment
Less: Accumulated
Depreciation
Investment in Skate Co. Stock
Investment in Skate Co.
Bonds
Investment in Tin Co. Bonds
Total Assets
Pond
Corp.
Skate
Co.
450,000
18,500
(285,000)
(35,000)
250,000
3,600
(136,000)
(24,000)
(50,000)
(24,000)
(11,900)
24,450
87,050
(40,000)
(10,500)
(9,500)
87,050
30,000
222,500
87,050
(30,000)
279,550
150,000
30,000
(10,000)
170,000
53,100
176,000
47,000
65,000
45,000
140,000
50,000
400,000
10,000
50,000
22,000
240,000
(185,000)
139,050
(94,000)
42,400
134,000
994,550
Elimination Entries
DR
CR
30,000
340,000
Accounts Payable
Interest and Other Payables
Bonds Payable
Bond Discount
Common Stock
Additional Paid-in Capital
Retained Earnings
NCI in NA of Skate Co.
65,000
45,000
300,000
150,000
155,000
279,550
11,000
12,000
100,000
(3,000)
30,000
20,000
170,000
994,550
340,000
1,500
150,000
35,700
185,700
700,000
14,900
(421,000)
(57,500)
5,700
(90,000)
(30,300)
(21,400)
0
94,700
(7,650)
87,050
5,700
10,000
15,700
222,500
87,050
(30,000)
279,550
4,200
24,450
28,050
7,650
35,700
Consolidated
5,700
100,100
241,000
2,000
13,000
60,000
1,500
15,000
9,750
3,150
89,400
75,000
166,950
(352,500)
0
42,400
0
134,000
1,124,600
299,350
15,700
55,150
76,000
55,000
360,000
(1,800)
150,000
155,000
279,550
50,850
72,050
1,124,600
2,000
40,000
1,200
30,000
20,000
185,700
3,250
1,050
282,000
53,000
190,000
59,000
700,000
$374,000
2.
$294,000
3.
$7,400
4.
$32,000
5.
$13,125
6.
$83,000
7.
$3,000
Purchase price
[$106,400 + ($6,400 / 4 years)]
Book value [$100,000 + $4,000 +
($4,000 / 4 years)]
Loss on bond retirement
Reported net income of Grange Corporation
Add: Inventory profits of prior period
realized in 20X6
Less: Unrealized inventory profits of
20X6
Less: Loss on bond retirement,
January 1, 20X6
Add: Interest differential in 20X6
Realized income of Grange
Less: Depreciation on differential assigned
to buildings and equipment
Less: Impairment of goodwill
Adjusted income
Proportion of stock held by
noncontrolling interest
Income assigned to noncontrolling interest
Par value of shares outstanding
Retained earnings, December 31, 20X6
Less: Unrealized inventory profit
Unrecorded portion of bond
retirement loss ($3,000 - $600)
Add: Unamortized differential assigned to
buildings and equipment ($30,000 $9,000)
Unimpaired goodwill ($13,125 - $7,500)
Proportion of stock held by
noncontrolling interest
Assigned to noncontrolling interest
($13,125 - $7,500)
$108,000
(105,000)
$ 3,000
$40,000
2,000
(6,000)
(3,000)
600
$33,600
(3,000)
(7,500)
$23,100
x 0.20
$ 4,620
$200,000
125,000
(6,000)
(2,400)
21,000
5,625
$343,225
x
0.20
$ 68,645
b.
c.
$1,152,000
128,000
$1,280,000
(1,200,000)
$ 80,000
(30,000)
$ 50,000
$ 500,000
280,000
470,000
$1,250,000
x
0.90
$1,125,000
72,000
(4,050)
$1,192,950
$1,239,840
(90,000)
36,000
(4,050)
4,860
22,500
(21,600)
5,400
$ 1,192,950
$1,010,000
(6,000)
$1,004,000
(980,000)
$ 24,000
d.
e.
$100,000
4,500
24,000
(5,400)
(6,000)
(25,000)
$ 92,100
x
0.10
$ 9,210
$1,250,000
(4,500)
$1,245,500
30,000
50,000
$1,325,500
x
0.10
$ 132,550
P8-28 (continued)
f. elimination entries
Book Value Calculations:
NCI
10%
Original Book
Value
+ Net Income
- Dividends
Ending Book Value
125,000
10,000
(4,000)
131,000
Topp Co.
90%
1,125,000
90,000
(36,000)
1,179,000
Common
Stock
Premium on
Common
Stock
500,000
280,000
500,000
280,000
Retained
Earnings
470,000
100,000
(40,000)
530,000
Total
4,500
(5,400)
24,000
(6,000)
17,100
500,000
280,000
470,000
105,390
11,710
Topp Co.'s
Share
4,050
(4,860)
21,600
(5,400)
15,390
NCI's share
450
(540)
2,400
(600)
1,710
40,000
1,194,390
132,710
NCI 10%
8,000
(2,500)
5,500
22,500
2,500
Topp Co.
90%
72,000
(22,500)
49,500
Land
30,000
30,000
Goodwill
50,000
(25,000)
25,000
P8-28 (continued)
20X6 Upstream Transactions
Total
=
Sales
64,000
COGS
44,800
Gross Profit
19,200
Gross Profit %
30.00%
Re-sold
49,000
34,300
14,700
Ending Inventory
15,000
10,500
4,500
Re-sold
60,000
42,000
18,000
Ending Inventory
18,000
12,600
5,400
4,050
450
4,500
200,000
20,000
20,000
5,000
P8-28 (continued)
g.
Topp
Bussman
Corp.
Income Statement
Sales
Other Income
3,101,000
135,000
790,000
31,000
Less: COGS
(2,009,000
)
(430,000)
(195,000)
(643,000)
(85,000)
(206,000)
Elimination Entries
DR
CR
78,000
125,000
20,000
3,813,000
21,000
4,500
72,600
119,000
20,000
25,000
82,890
471,890
100,000
471,890
100,000
3,028,950
471,890
(50,000)
3,450,840
470,000
100,000
(40,000)
530,000
39,500
112,500
29,000
85,100
301,000
1,231,000
2,750,000
(1,210,000
)
348,900
513,000
1,835,000
105,390
353,390
11,710
365,100
470,000
365,100
835,100
(2,361,900)
(280,000)
(710,000)
24,000
22,500
262,600
2,500
265,100
(25,000)
24,000
0
481,100
(9,210)
471,890
265,100
40,000
305,100
3,028,950
471,890
(50,000)
3,450,840
5,000
9,000
5,400
30,000
(619,000)
1,239,840
Consolidated
68,500
183,600
644,500
1,774,000
4,585,000
(1,829,000)
4,050
985,000
1,194,39
0
49,500
985,000
200,000
200,000
25,000
5,448,840
2,392,000
59,050
98,000
79,000
200,000
1,000,000
1,000,000
700,000
3,450,840
3,000
500,000
280,000
530,000
5,000
9,000
1,000,00
0
200,000
3,000
500,000
280,000
835,100
2,448,29
0
0
0
0
25,000
5,451,600
163,000
0
305,100
1,000,000
700,000
3,450,840
450
5,448,840
2,392,000
2,832,55
0
132,710
5,500
137,760
443,310
5,451,600
b.
$1,152,000
128,000
$1,280,000
(1,200,000)
$ 80,000
(30,000)
$ 50,000
$ 500,000
280,000
470,000
$1,250,000
x
0.90
$1,125,000
72,000
$1,197,000
$1,197,000
90,000
(36,000)
$1,251,000
$1,010,000
(6,000)
$1,004,000
(980,000)
$ 24,000
P8-29A (continued)
d.
e.
$100,000
4,500
24,000
(5,400)
(6,000)
(25,000)
$ 92,100
x
0.10
$ 9,210
$1,250,000
(4,500)
$1,245,500
30,000
50,000
$1,325,500
x
0.10
$ 132,550
P8-29A (continued)
f. Elimination entries:
Book Value Calculations:
NCI
10%
Original Book
Value
+ Net Income
- Dividends
Ending Book Value
125,000
10,000
(4,000)
131,000
Topp Co.
90%
1,125,000
90,000
(36,000)
1,179,000
Common
Stock
Premium on
Common
Stock
500,000
280,000
500,000
280,000
Retained
Earnings
470,000
100,000
(40,000)
530,000
Total
4,500
(5,400)
24,000
(6,000)
17,100
Topp Co.'s
Share
4,050
(4,860)
21,600
(5,400)
15,390
500,000
280,000
470,000
90,000
11,710
25,000
2,500
NCI's share
450
(540)
2,400
(600)
1,710
40,000
1,179,000
132,710
Impairment Loss
Goodwill Impairment Loss
Goodwill
25,000
2,500
P8-29A (continued)
20X6 Upstream Transactions
Total
=
Sales
64,000
COGS
44,800
Gross Profit
19,200
Gross Profit %
30.00%
Re-sold
49,000
34,300
14,700
Ending Inventory
15,000
10,500
4,500
Re-sold
60,000
42,000
18,000
Ending Inventory
18,000
12,600
5,400
4,050
450
4,500
200,000
20,000
20,000
P8-29A (continued)
Topp
Bussman
Corp.
Income Statement
Sales
Other Income
3,101,000
135,000
790,000
31,000
Less: COGS
(2,009,000
)
(430,000)
(195,000)
(643,000)
(85,000)
(206,000)
Elimination Entries
DR
CR
78,000
125,000
20,000
Consolidated
3,813,000
21,000
4,500
72,600
119,000
20,000
(280,000)
(710,000)
90,000
479,000
100,000
90,000
338,000
240,100
(25,000)
24,000
0
481,100
479,000
100,000
11,710
349,710
2,500
242,600
(9,210)
471,890
3,033,000
470,000
Net Income
Less: Dividends Declared
Ending Balance
479,000
(50,000)
3,462,000
100,000
(40,000)
530,000
39,500
112,500
29,000
85,100
301,000
1,231,000
2,750,000
(1,210,000
)
348,900
513,000
1,835,000
Balance Sheet
Cash
Current Receivables
Inventory
Land
Buildings & Equipment
Less: Accumulated
Depreciation
Investment in Bussman Corp.
Stock
Investment in Bussman Corp.
Bonds
Investment in Topp Bonds
Goodwill
Total Assets
Current Payables
Bonds Payable
Premium on Bonds Payable
Common Stock
Premium on Common Stock
Retained Earnings
NCI in NA of Bussman Corp.
25,000
(2,361,900)
24,000
470,000
4,050
349,710
823,760
3,028,950
242,600
40,000
282,600
5,000
9,000
5,400
30,000
(619,000)
471,890
(50,000)
3,450,840
68,500
183,600
644,500
1,774,000
4,585,000
(1,829,000)
1,179,00
0
72,000
1,251,000
985,000
200,000
50,000
5,460,000
2,392,000
80,000
98,000
79,000
200,000
1,000,000
1,000,000
700,000
3,462,000
3,000
500,000
280,000
530,000
5,000
9,000
1,000,00
0
200,000
3,000
500,000
280,000
823,760
450
985,000
200,000
25,000
2,480,40
0
0
0
0
25,000
5,451,600
163,000
0
282,600
132,710
1,000,000
700,000
3,450,840
137,760
5,460,000
2,392,000
2,500
2,823,71
0
8,000
423,310
5,451,600
100,000
25,000
75,000
50,000
6,000
4,000
10,000
16,400
18,000
34,400
106,000
9,000
$106,000
$9,000
(8,000)
1,000
$107,000
(100,000)
$ 7,000
P8-29A (continued)
c.
Bennett
Corp.
Income Statement
Sales
Interest Income
Less: Interest Expense
Less: Other Expenses
Dividend Income
Consolidated Net Income
NCI in Net Income
Stone
Cont.
Co.
450,000
8,000
(20,000)
(368,600)
6,000
75,400
(18,000)
(182,000)
75,400
50,000
70,000
Controlling Interest in NI
Elimination Entries
DR
CR
250,000
8,000
50,000
Net Income
Less: Dividends Declared
Ending Balance
75,400
(40,000)
222,600
50,000
(10,000)
110,000
Balance Sheet
Cash
Accounts Receivable
Inventory
Other Assets
Investment in Stone Bonds
Investment in Stone Stock
Total Assets
61,600
100,000
120,000
340,000
106,000
75,000
802,600
20,000
80,000
110,000
250,000
Accounts Payable
Bonds Payable
Common Stock
Retained Earnings
NCI in NA of Stone Cont.
80,000
200,000
300,000
222,600
50,000
200,000
100,000
110,000
802,600
460,000
460,000
9,000
6,000
14,000
4,000
16,400
34,400
25,000
18,000
4,200
34,400
81,600
100,000
100,000
81,600
2,800
284,400
9,000
9,000
Consolidated
700,000
0
(29,000)
(550,600)
0
120,400
(20,400)
100,000
210,000
9,000
10,000
19,000
100,000
(40,000)
270,000
106,000
75,000
181,000
81,600
180,000
230,000
590,000
0
0
1,081,600
19,000
50,000
34,400
103,400
130,000
300,000
300,000
270,000
81,600
1,081,600