Q4 On January 1 2015 Parent Company purchased 70 interest in

Q.4. On January 1, 2015, Parent Company purchased 70% interest in the common stock of Subsidiary Company for O.R 1,000,000. The difference between implied and book value relates to the subsidiary\'s goodwill The following information is from the consolidated retained earnings section of the consolidated statements workpaper for the year ended December 31, 2015: Consolidated balances Subsidiary Company 1/01/15 retained earnings Net income 220,000 Dividends declared (80.000) 12/31/15 retained earnings O.R 300,000 O.R 1,400,000 680,000 (140,000) O.R 440.000 R 1.940.000 Subsidiary Company\'s stockholders\' equity includes only common stock and retained earnings. With book value of O.R 1,350,000 at the date of acquisition. Instructions: a. Prepare the workpaper eliminating entries for a consolidated statements workpaper on December 31, 2015. Parent Company uses the cost method. .7 marks) o. Compute the total noncontrolling interest to be reported on the consolidated balance sheet on December 31, 2015. .....(3 marks)

Solution

Company Implied Value

Parent Price (70%)

NCI Value (30%)

Price Paid for Investment

1428571

1000000

428571

Less: Book Value of Interest acquired

             Total Equity

-1350000

-945000

-405000

Excess of Cost over book value

78571

55000

23571

Differential of IV and BV applicable:

     Goodwill

78571

a) Elimination Entries:

b) Total Non-Controlling Interest at Dec. 31, 2015

Non-controlling interest on Jan.1, 2015

428571

Add: Share of Net Income (220000*30%)

66000

Less: Share of Dividends Declared (80,000*30%)

-24000

42000

Non-controlling Interest on Dec. 31, 2015

470571

	Company Implied Value	Parent Price (70%)	NCI Value (30%)
Price Paid for Investment	1428571	1000000	428571
Less: Book Value of Interest acquired
Total Equity	-1350000	-945000	-405000
Excess of Cost over book value	78571	55000	23571
Differential of IV and BV applicable:
Goodwill	78571