Question

On January 1, Year 1, Giant bought 80% of the shares of Son for $20 million....

On January 1, Year 1, Giant bought 80% of the shares of Son for $20 million. At the time, the fair value of the 20% noncontrolling interest was $4 million.

The equity of Son on the date of acquisition was $16 million. Its common stock =$1 million and retained earnings =$15 million. All assets and liabilities had fair value equal to book value, except Son owned a building with a fair value $ of $30 million and a book value of $25 million. It has 10 years of remaining life and no salvage value.

During Year 1, Son reported revenues of $5 million and expenses of $3 million. It declared dividends of $300,000. Giant had net income from its own operations (ignoring its interest in Son) of $50 million.

1) As of the date of acquisition, what consolidation entry or entries are needed? Show your work.

2) At the end of the year, what is the amount of income that is allocable to the controlling interest, that is, the shareholders of the parent company?

Please Show work.Thank You

Business   Accounting   
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Answer #1

FIRSTLY THE CONSOLIDATION ENTRY ON THE ACQUISITION DATE IS MADE. THEN EARNINGS ATTRIBUTABLE TO PARENT COMPANY IS CALCULATED. WORKINGS ARE ANNEXED.

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