a.

Journal entries recorded by Brown Corporation on its investment in Tann Company:

(1) Investment in Tann Company Stock 120,000

Cash 120,000

Record purchase of Tann Company stock.

(2) Cash 9,000

Investment in Tann Company Stock 9,000

Record dividends from Tann Company: $15,000 x 0.60

(3) Investment in Tann Company Stock 24,000

Income from Tann Company 24,000

Record equity-method income: $40,000 x 0.60

b. Journal entries recorded by Promise Enterprises on its investment in Brown Corporation:

(1) Investment in Brown Corporation Stock 315,000

Cash 315,000

Record purchase of Brown Corporation stock.

(2) Cash 45,000

Investment in Brown Corporation Stock 45,000

Record dividends from Brown Corporation: $50,000 x 0.90

(3) Investment in Brown Corporation Stock 129,600

Income from Brown Corporation 129,600

Record equity-method income: ($120,000 + $24,000) x 0.90

Commo Retaine
Brown n Add. d
NCI   Corp. Stock   Paid-In Earning
  40% + 60% =  + Capital +  s
Beginning book 120,00
value 80,000   0   100,000   60,000   40,000
+ Net Income 16,000   24,000           40,000
- Dividends -6,000   -9,000           -15,000
 135,00
Ending book value 90,000   0   100,000   60,000   65,000

Common stock 100,000

Additional paid-in capital 60,000

Retained earnings 40,000

Income from Tann Co. 24,000

NCI in NI of Tann Co. 16,000

Dividends declared 15,000

Investment in Tann Co. 135,000

NCI in NA of Tann Co. 90,000

Commo Retaine
Promis n Add. d
NCI e Stock   Paid-In   Earning
  10% +  90% =  + Capital + s
Beginning book 315,00
value 35,000   0   150,000   60,000   140,000
129,60
+ Net Income 14,400   0           144,000
- Dividends -5,000   -45,000           -50,000
399,60
Ending book value 44,400   0   150,000   60,000   234,000

Common stock 150,000

Additional paid-in capital 60,000

Retained earnings 140,000

Income from Brown Corp. 129,600

NCI in NI of Brown Corp. 14,400

Dividends declared 50,000

Investment in Brown Corp. 399,600

 NCI in NA of Brown Corp. 44,400

E9-11 Consolidated Balance Sheet with Reciprocal Ownership

Common stock 200,000

Retained earnings 240,000

Investment in Short Co. 352,000

NCI in NA of Short Co. 88,000

Treasury Stock 61,000

Investment in Talbott Co. 61,000

Elimination
Consolidat
  Talbott Short Entries
e
  Co. Co. DR CR
Balance Sheet          
Cash 78,000 39,000     117,000
Accounts Receivable 120,000 80,000     200,000
120,00
Inventory 150,000 0     270,000
Buildings & Equipment 300,00
(net) 400,000 0     700,000
352,00
Investment in Short Co. 352,000     0 0
Investment in Talbott Co.   61,000   61,000 0
1,100,00 600,00 413,00
Total Assets 0 0   0 1,287,000
           
Accounts Payable 90,000 60,000     150,000
100,00
Bonds Payable 400,000 0     500,000
200,00 200,00
Common Stock 300,000 0 0   300,000
240,00 240,00
Retained Earnings 310,000 0 0   310,000
Treasury Stock     61,000   -61,000
NCI in NA of Short Co       88,000 88,000
1,100,00 600,00 501,00
Total Liabilities & Equity 0 0 0 88,000 1,287,000
 Talbott Company and Subsidiary

Consolidated Balance Sheet

December 31, 20X9

Current Assets:

- Cash $117,000
- Accounts Receivable 200,000
- Inventory 270,000 $ 587,000

Noncurrent Assets:

- Buildings and Equipment (net) 700,000

Total Assets $1,287,000

Current Liabilities:

- Accounts Payable $ 150,000

Bonds Payable Stockholders' Equity: 500,00

- Controlling Interest:
Common Stock $300,000
Retained Earnings 310,000
- Total Controlling Interest $610,000
- Noncontrolling Interest 88,000
- Total Equity before Reduction for Treasury Shares $698,000
- Less: Treasury Shares (61,000)

Total Stockholders’ Equity 637,000

Total Liabilities and Stockholders' Equity $1,287,000