高级会计学（第10版）习题答案 ch04-Beams10e-sm

Chapter4

CONSOLIDATIONTECHNIQUESANDPROCEDURES

AnswerstoQuestions

1Consolidatedfinancialstatementsarenotaffectedbythemethodusedbytheparentcompanyinaccounting

foritssubsidiaryinvestments.Suchstatementsarethesameregardlessofwhethertheparentcompanyuses

thecostmethod,theequitymethod,oranincompleteequitymethodinaccountingfbritssubsidiary.The

workingpaperadjustmentswilldiffer,however,dependingonhowtheparentaccountsforitssubsidiary.

2Thestandardmethodofaccountingfbrequityinvestmentsof20percentormoreistheequitymethod.But

iftheparentissuesonlyconsolidatedfinancialstatementsasthestatementsoftheprimaryreportingentity,

andtheconsolidatedfinancialstatementsarecorrect,itmakesnodifferencehowtherecordsoftheparent

companyaremaintained.TheFinancialAccountingStandardsBoard(anditspredecessororganization)

establishedstandardsforexternalreportingbutnotformaintenanceofinternalaccountingrecords.

3Undertheequitymethod,aparentamortizespatentsfromitssubsidiaryinvestmentsbyadjustingits

subsidiaryinvestmentandincomeaccounts.Sincepatentsandpatentamortizationaccountsarenot

recordedontheparent'sbooks,theyarecreatedfbrconsolidatedstatementpurposesthroughworking

paperentries.

4Noncontrollinginterestshareisenteredintheconsolidationworkingpapersbypreparingaworkingpaper

adjustingentryinwhichnoncontrollinginterestshareisdebitedandnoncontrollinginterestiscredited.The

noncontrollinginterestshare(debit)iscarriedtotheconsolidatedincomestatementasadeduction,andthe

credittononcontrollinginterestfornoncontrollinginterestshareisaddedtothebeginningnoncontroiling

interest.Thenoncontrollinginterestshareiscalculatedbasedonthesubsidiary'sreportednetincome

adjustedtoreflectfairvaluethroughtheamortizationoftheexcessoffairvalueoverbookvalue.Thisis

theapproachillustratedthroughoutthistext.

5Workingpaperproceduresfortheinvestmentinsubsidiary,incomefromsubsidiary,andsubsidiaryequity

accountsarealikeinregardtotheobjectivesofconsolidation.Regardlessoftheconfigurationofthe

workingpaperentries,thefinalresultofadjustmentsfortheseitemsistoeliminatethemthroughworking

paperentries.Inotherwords,theinvestmentinsubsidiary,incomefromsubsidiary,andthecapitalstock,

additionalpaid-incapital,retainedearnings,andotherstockholders'equityaccountsofthesubsidiary

neverappearinconsolidatedfinancialstatements.

6Whentheparentcompanydoesnotamortizefairvalue/bookvaluedifferentialsonitsseparatebooks,the

parentcompany'sincomefromsubsidiaryandinvestmentinsubsidiaryaccountsareoverstatedintheyear

ofacquisition.Insubsequentyears,theincomefromthesubsidiary,investmentinsubsidiary,andparent's

beginningretainedearningswillbeoverstated.Theerrormaybecorrectedintheworkingpaperswiththe

followingentries:

Yearofacquisition

IncomefromsubsidiaryXXX

InvestmentinsubsidiaryXXX

Subsequentyear

IncomefromsubsidiaryXXX

Retainedearnings-parentXXX

InvestmentinsubsidiaryXXX

©2009PearsonEducation,Inc.publishingasPrenticeHall

4-1

4-2ConsolidationTechniquesandProcedures

Byenteringacorrectingentry,allotherworkingpaperentriesarethesameasiftheparentprovidedfor

amortizationonitsseparatebooks.

Iftheerrorsarenotcorrectedthroughtheworkingpaperentriessuggestedabove,theentryto

eliminatetheincomefromsubsidiaryintheyearofacquisitionispreparedintheusualmannerwithout

furthercomplicationsbecauseneitherthebeginninginvestmentnorretainedearningsaccountsareaffected

bytheomission.Insubsequentyearstheentrytoeliminateincomefromsubsidiaryanddividendsfrom

subsidiarywillhavetobechangedtocorrectthebeginning-of-the-periodretainedearningsasfollows:

IncomefromsubsidiaryXXX

Retainedearnings—parentXXX

Dividends(subsidiary)XXX

InvestmentinsubsidiaryXXX

7No.Workingpaperadjustmentsarenotenteredinthegeneralledgeroftheparentcompanyoranyother

entity.Theyareusedinthepreparationofconsolidatedfinancialstatementsforaconceptualentityfor

whichtherearenoformalaccountingrecords.

8Workingpapersaretoolsoftheaccountantthatfacilitatetheconsolidationofparentandsubsidiary

financialstatements.Giventhetoolsavailable,theaccountantshouldselectthosethataremostconvenient

inthecircumstances.Iffinancialstatementsaretobeconsolidated,thefinancialstatementapproachisthe

appropriatetool.Thetrialbalanceapproachismostconvenientwhenthedataarepresentedintheformof

atrialbalance.Theaccountantneedstobefamiliarwithbothapproachestoperformtheworkasefficiently

aspossible.

9Workingpaperadjustmentandeliminationentriesasillustratedinthistextareexactlythesamewhenthe

trialbalanceapproachisusedaswhenthefinancialstatementapproachisused.Thisispossiblethrougha

check-offsystemthatnullifiestheclosingprocesswhenthefinancialstatementapproachisused.

10Theretainedearningsoftheparentcompanywillequalconsolidatedretainedearningsiftheequitymethod

ofaccountinghasbeencorrectlyapplied.Inconsolidatingthefinancialstatementsofaffiliatedcompanies,

thebeginningretainedearningsoftheparentareusedasbeginningconsolidatedretainedearnings.Ifthe

equitymethodhasnotbeencorrectlyapplied,parentbeginningretainedearningswillnotequalbeginning

consolidatedretainedearnings.Inthiscase,retainedearningsoftheparentareadjustedtoacorrectequity

basisinordertoestablishthecorrectamountofbeginningconsolidatedretainedearnings.Thus,working

paperadjustmentstobeginningretainedearningsoftheparentareneededwheneverthebeginningretained

earningsoftheparentdonotcorrectlyreflecttheequitymethod.

11Thenoncontrolinginterestthatappearsintheconsolidatedbalancesheetcanbecheckedfirstadjustingthe

theequityofthesubsidiaryontheconsolidatedbalancesheetdatetofairvalue(i.e.,adjustingforany

unamortizedexcessoffairvalueoverbookvalue)andthenmultiplyingbythenoncontrollinginterest

percentage.Consolidatedretainedearningsatabalancesheetdatecanbecheckedbycomparingthe

amountwiththeparent'sretainedearningsonthesamedate.Ifconsolidatedretainedearningsandparent

retainedearningsarenotequal,eitherconsolidatedretainedearningshavebeencomputedincorrectly,or

parentretainedearningsdonotreflectacorrectequitymethodofaccounting.

12Consolidatedassetsandliabilitiesarereportedforallequityholders—noncontrollingaswellascontrolling.

Therefore,thechangeinnetassetsfromoperationsforaperiodresultsfromnoncontrollinginterestshare

andconsolidatednetincome.

13No.Itrelatestoallinterestsintheconsolidatedentity.Thisdifferenceisoneofmanyinconsistenciesinthe

conceptsunderlyingconsolidatedfinancialstatements.Consider,forexample,theerrorthatcouldresult

fromdividingcashprovidedbyoperationsbyoutstandingparentcompanysharestogetacomputationof

cashflowpershare.

©2009PearsonEducation,Inc.publishingasPrenticeHall

SOLUTIONSTOEXERCISES

SolutionE4-1

1d6d

2a7b

3a8b

4d9a

5b10b

SolutionE4-2

Preliminarycomputations

InvestmentcostJanuary2$300,000

ImpliedtotalfairvalueofSallyForth($300,000/80%)$375,000

Less:Bookvalue(250,000)

Excessfairvalueoverbookvalue$125z000

Excessallocatedto:

Inventory$12,500

Remaindertogoodwill112,500

Excessfairvalueoverbookvalue$125,000

1IncomefromSallyForth

SallyForth'sreportednetincome$70z000

Less:Excessallocatedtoinventory(soldin2009)(12,500)

SallyForthadjustedincome$57,500

Ponder7s80%share$”，000

2Noncontrollinginterestshare

SallyForth'sadjustedincome$57,500x20%noncontrolling

interest$11,500

3NoncontrollinginterestDecember31

SallyForthfsequitybookvalue$260,000

Add:Unamortizedexcess(Goodwill)112,500

SallyForth'sequityfairvalue$372,500

20%noncontrollinginterest$74,500

4InvestmentinSallyForthDecember31

InvestmentcostJanuary2$300,000

Add:IncomefromSallyForth(given)*50,000

(48,000)

Less:Dividends($60z000x80%)

InvestmentinSallyForthDecember31$302,000

*AssumesthisisbasedonSallyForth'sadjustedincome

5Consolidatednetincome$191,700

Noncontrollinginterestshare$11,566

ControllinginterestshareequalsParentN工underequity$1801200

method.

4-4ConsolidationTechniquesandProcedures

SolutionE4-3

1$350,000($150,000+$220,000-$20,000intercompany)

Preliminarycomputationsfor2and3

InvestmentcostonJanuary1,2009$14,000

ImpliedtotalfairvalueofStarman($14,000/70%)$20,000

BookvalueofStarman15,000

ExcessallocatedentirelytoGoodwill

2Primrose^sseparateincomefor2011$12,000

LossfrominvestmentinStarman($500x70%)(350)

Controllingshareofconsolidatednetincome$11,650

3InvestmentcostJanuary1,2009$14,000

Add:Shareofincomelessdividends2009—2011

($700income-$500dividends)x70%140

InvestmentbalanceDecember31,2011$14,140

SolutionE4-4

Preliminarycomputations

Investmentcost$580,000

ImpliedtotalfairvalueofStine($580/000/80%)$725,000

Bookvalue600,000

Totalexcessfairvalueoverbookvalue$125,000

Excessallocatedto:

Equipment(5-yearlife)$50z000

Patents(10-yearamortizationperiod)75,000

Totalexcessfairvalueoverbookvalue$125,00。

IncomefromStine20102011

Stine'sreportednetincome$120,000$150,000

Less:Depreciationofexcessallocatedtoequipment(10,000)(10z000)

Less:Amortizationofpatents(7,500)(7,500)

Stinezsadjustedincome$102,500$132,500

IncomefromStine(80%)$82,000$106,000

laConsolidatednetincomefor2010

Penair'snetincome=controllingshareofconsolidatednet

incomeunderequitymethod$340,000

lbInvestmentinStineDecember31,2010

CostJanuary1$580,000

Add:IncomefromStine—201082,000

Less:DividendsfromStine—2010($80,000x80%)(64,000)

InvestmentinStineDecember31$598,000

lcNoncontrollinginterestshare—2010

($102,500adjustedincomex20%)$2QZ5Q5:

IdNoncontrollinginterestDecember31,2011

Stine'sequitybookvalueatacquisitiondate$600z000

Add:Incomelessdividendsfor2010and2011(seenote)100,000

Stine'sequitybookvalueatDecember31,2011700,000

UnamortizedexcessatDecember31,201190,000

Stine'sequityfairvalueatDecember31,2011$790,000

Noncontrollinginterestpercentage20%

©2009PearsonEducation,Inc.publishingasPrenticeHall

NoncontrollinginterestDecember31,2011$158,000

SolutionE4-4(continued)

Note:Stine'sincomelessdividends:

2010NetIncome$120

2010Dividends(80)

2011NetIncome150

2011Dividends(90)

Total$100

SolutionE4-5

1c

2a

3b

4c

5d

SolutionE4-6

PartyCorporationandSubsidiary

PartialConsolidatedCashFlowsStatement

fortheyearendedDecember31,

CashFlowsfromOperatingActivities

Controllinginterestshareofconsolidatednetincome$75,000

Adjustmentstoreconcilenetincometocash

providedbyoperatingactivities:

Noncontrollinginterestshare$25,000

Undistributedincomeofequityinvestees(2,500)

Lossonsaleofland5,000

Depreciationexpense60,000

Patentsamortization8,000

Increaseinaccountsreceivable(52,500)

Increaseininventories(22,500)

Decreaseinaccountspayable(10z000)10z500

Netcashflowsfromoperatingactivities$85,5Q0

SolutionE4-7

ProlaxCorporationandSubsidiary

PartialConsolidatedCashFlowsStatement

fortheyearendedDecember31,

CashFlowsfromOperatingActivities

Cashreceivedfromcustomers$322,500

Dividendsreceivedfromequityinvestees7Z000

Less:Cashpaidtosuppliers$182,500

Cashpaidtoemployees27,000

Cashpaidforotheroperatingitems23,500

Cashpaidforinterestexpense12,000245,000

Netcashflowsfromoperatingactivities$84,500

4-6ConsolidationTechniquesandProcedures

SOLUTIONSTOPROBLEMS

SolutionP4-1(inthousandsof?)

Preliminarycomputations

InvestmentinSeine(75%)January1,2009$2,400

ImpliedfairvalueofSeine($2,400/75%)$3Z200

BookvalueofSeine(2,400)

Totalexcessoffairvalueoverbookvalue$800

Excessallocated:

10%toinventories(soldin2009)$80

40%toplantassets(uselife8years)320

50%togoodwill400

Totalexcessoffairvalueoverbookvalue$800

1GoodwillatDecember31,2013(notamortized)$400

2Noncontrollinginterestsharefor2013

Netincome($lz000sales-$600expenses)$400

Less:Amortizationofexcess

Plantassets($320/8yrs.)(40)

AdjustedSeineincome$360

25%Share$90

3ConsolidatedretainedearningsDecember31,2012

EqualtoPearl'sDecember31,2012retainedearnings

Sincethisatrialbalance,reportedretainedearnings

equalsbeginningof2013retainedearnings.$1,670

4ConsolidatedretainedearningsDecember31,2013

Pearl'sretainedearningsDecember31z2012$1,670

Add:Pearl'snetincomefor20131,085

Less:Pearl'sdividendsfor2013(500)

ConsolidatedretainedearningsDecember31$2,255

5Consolidatednetincomefor2013

Consolidatedsales$5Z000

Less:Consolidatedexpenses($3,785+$40depreciation)(3,825)

Totalconsolidatedincome1,175

Less:Noncontrollinginterestshare(90)

Controllingshareofconsolidatednetincomefor2013$1,085

6NoncontrollinginterestDecember31z2012

Seinezsstockholders'equityatbookvalue$2,400

Unamortizedexcessafterfouryears:

Inventory0

Plantassets($320-$160)160

Goodwill400

Seine'sstockholders7equityatfairvalue$2,960

25%Seine'sstockholders'equityatfairvalue$740

7NoncontrollinginterestDecember31,2013

Seine'sstockholders7equityatbookvalue$2,600

Unamortizedexcessafterfiveyears:

Inventory0

Plantassets($320-$200)120

Goodwill400

Seine'sstockholders7equityatfairvalue$3,120

©2009PearsonEducation,Inc.publishingasPrenticeHall

25%Seine'sstockholders'equityatfairvalue$780

4-8ConsolidationTechniquesandProcedures

SolutionP4-2

1PalmCorporationandSubsidiary

ConsolidationWorkingPapers

fortheyearendedDecember31,2009

80%AdjustmentsandConsolidated

PalmSailEliminationsStatements

IncomeStatement

Sales$310,000$100,000$410,000

IncomefromSail10,500a10,500

Costofgoodssold200,000*65,000*265,000*

Operatingexpenses77,000*20,000*97z00£*

ConsolidatedNI$48,000

Noncontrol.share

($15,000x30%)c4,5004,500*

Netincome-

Control.share$43,500$15,000$43,500

RetainedEarnings

Retainedearnings

—Palm$65,000$65,000

Retainedearnings

—Sail$11,000b11,000

Netincome43,500，15,000，43,500

Dividends30,000*10,000*a7,000

c3,00030,000*

Retainedearnings

December31$78,500$16,000$78,500

BalanceSheet

Cash$45,500$15,000$60,500

Acc.Receiv.—net60,00030,00090,000

Inventories24,00020,00044,000

PP&E—not120,00035,000155,000

InvestmentinSail49,000a3,500

b45,500

$298,500$100,000S349,500

Accountspayable$30,000$18,000$48,000

Otherliabilities20,00012,00032,000

Capitalstock150,00050,000b50,000150,000

Otherpaid-in

capital20,0004,000b4,00020,000

Retainedearnings78,500，16,000，78,500

$298,500$100,000

NoncontrollinginterestJanuary1b19,500

NoncontrollinginterestDecember31c1,50021,000

$349,5001

*Deduct

Workingpaperentries

aToeliminateincomefromSailanddividendsreceivedfromSailandadjust

theinvestmentinSailaccounttoitsbeginningoftheperiodbalance.

bToeliminatereciprocalinvestmentinSailandequityamountsofSailandto

enterbeginningnoncontrollinginterest.

cToenternoncontrollinginterestshareofsubsidiaryincomeanddividends.

©2009PearsonEducation,Inc.publishingasPrenticeHall

SolutionP4-2(continued)

2PalmCorporationandSu