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1.

On January 1, 20X1, Parent Company purchased 80% of the common stock of


Subsidiary Company for 316,000. On this date, Subsidiary had ordinary shares, share
premium, and retained earnings of 40,000,120,000, and 190,000, respectively. Net income
and dividends for 2 years for Subsidiary Company were as follows:
20X1
20X2
Net income.............................. 50,000
90,000
Dividends................................10,000
20,000
On January 1, 20X1, the only tangible assets of Subsidiary which were undervalued were
inventory and building. Inventory, for which FIFO is used, was worth 5,000 more than
cost. The inventory was sold in 20X1. Building, which was worth 15,000 more than book
value, has a remaining life of 8 years, and straight-line depreciation is used.
Required:
1. Using equity method provide for all journal entries for 20x1 and 20x2
2. Using equity method provide for all journal entries for 20x1 and 20x2 (assuming NCI
is measured on the basis of its proportionate interest in the acquirees
identifiable net assets)

1. On January 1, 20X1, Parent Company purchased 80% of the common stock of


Subsidiary Company for 316,000. On this date, Subsidiary had ordinary shares, share
premium, and retained earnings of 40,000,120,000, and 190,000, respectively. Net income
and dividends for 2 years for Subsidiary Company were as follows:
20X1
20X2
Net income.............................. 50,000
90,000
Dividends................................10,000
20,000
On January 1, 20X1, the only tangible assets of Subsidiary which were undervalued were
inventory and building. Inventory, for which FIFO is used, was worth 5,000 more than
cost. The inventory was sold in 20X1. Building, which was worth 15,000 more than book
value, has a remaining life of 8 years, and straight-line depreciation is used.
Required:
5. Using equity method provide for all journal entries for 20x1 and 20x2
6. Using equity method provide for all journal entries for 20x1 and 20x2 (assuming
NCI is measured on the basis of its proportionate interest in the acquirees
identifiable net assets)

1. On January 1, 20X1, Parent Company purchased 80% of the common stock of


Subsidiary Company for 316,000. On this date, Subsidiary had ordinary shares, share
premium, and retained earnings of 40,000,120,000, and 190,000, respectively. Net income
and dividends for 2 years for Subsidiary Company were as follows:
20X1
20X2
Net income.............................. 50,000
90,000
Dividends................................10,000
20,000
On January 1, 20X1, the only tangible assets of Subsidiary which were undervalued were
inventory and building. Inventory, for which FIFO is used, was worth 5,000 more than
cost. The inventory was sold in 20X1. Building, which was worth 15,000 more than book
value, has a remaining life of 8 years, and straight-line depreciation is used.
Required:
3. Using equity method provide for all journal entries for 20x1 and 20x2
4. Using equity method provide for all journal entries for 20x1 and 20x2 (assuming
NCI is measured on the basis of its proportionate interest in the acquirees
identifiable net assets)

1. On January 1, 20X1, Parent Company purchased 80% of the common stock of


Subsidiary Company for 316,000. On this date, Subsidiary had ordinary shares, share
premium, and retained earnings of 40,000,120,000, and 190,000, respectively. Net income
and dividends for 2 years for Subsidiary Company were as follows:
20X1
20X2
Net income.............................. 50,000
90,000
Dividends................................10,000
20,000
On January 1, 20X1, the only tangible assets of Subsidiary which were undervalued were
inventory and building. Inventory, for which FIFO is used, was worth 5,000 more than
cost. The inventory was sold in 20X1. Building, which was worth 15,000 more than book
value, has a remaining life of 8 years, and straight-line depreciation is used.
Required:
1. Using equity method provide for all journal entries for 20x1 and 20x2
2. Using equity method provide for all journal entries for 20x1 and 20x2 (assuming
NCI is measured on the basis of its proportionate interest in the acquirees
identifiable net assets)

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