Fred, Inc., and Herman Corporation formed a business combination on January 1, 2009, when Fred acquired a
Question:
Intra-entity inventory transfers occur regularly between the two companies. Merchandise carried over from one year to the next is always sold in the subsequent period.
Fred had not paid for half of the 2011 inventory transfers by year-end.
On January 1, 2010, Fred sold $15,000 in land to Herman for $22,000. Herman is still holding this land.
On January 1, 2011, Herman acquired $20,000 (face value) of Freds bonds on the open market.
These bonds had an 8 percent cash interest rate. On the date of repurchase, the liability was shown within Freds records at $21,386, indicating an effective yield of 6 percent. Hermans acquisition price was $18,732 based on an effective interest rate of 10 percent.
Herman indicated earning a net income of $25,000 within its 2011 financial statements. The subsidiary also reported a beginning Retained Earnings balance of $300,000, dividends paid of $4,000, and common stock of $100,000. Herman has not issued any additional common stock since its takeover. The parent company has applied the equity method to record its investment in
Herman.
a. Prepare consolidation worksheet adjustments for 2011.
b. Calculate the 2011 balance for the noncontrolling interests share of consolidated net income. In addition, determine the ending 2011 balance for noncontrolling interest in the consolidated balance sheet.
c. Determine the consolidation worksheet adjustments needed in 2012 in connection with the intraentitybonds.
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Step by Step Answer:
Advanced Accounting
ISBN: 978-0077431808
10th edition
Authors: Joe Hoyle, Thomas Schaefer, Timothy Doupnik