CHANGE IN OWNERSHIP INTEREST - Class Excercise

E1
On Jan. 2, 2010 PRNT corporation bought 10% ownership of SDRY company paid cash $10000.
On Oct. 1, 2011 PRNT corporation bought additional 25% ownership of SDRY company paid cash $2
On April 3, 2012 PRNT bought again another 25% of SDRY ownership and paid $30000
SDRY reported the following Ownership, Income and dividend:
Dec. 31
2010
2011
2012
Capital stock
80000
80000
80000
Retained earnings
20000
32000
40000
Income
20000
22000
30000
Dividend
8000
14000
15000
Required:
a. Calculate PRNT Investment in SDRY on Dec. 31, 2010, 2011 & 2012
b. Prepare all necessary entries to be recorded on PRNT book on:
Jan 2- 2010, Dec.31- 2010, Oct 1- 2011, Dec.31-2011, April 2-2012, Dec. 31- 2012
c. Explain what do you understand about the change of ownership interest for this acquisition.
Additonal information:
Parent brought Jan 2, 2010
Parent brought Oct 1, 2011
Parent brought Apr 3, 2012

c.

Interest
10%
25%
25%

10000
28000
30000

if the controlling interest is below 20% we use cost method,

if 20-50% we use equity, and if 50% above we use equity method
but we do consolidated statement

paid cash $10000.

company paid cash $28000.
d $30000

a.

Parent investment in Subsidiary on Dec 31, 2010

Parent brought 10% ownership of Subsidiary

Parent investment in Subsidiary on Dec. 31 2010
Parent investment in Subsidiary on Dec 31, 2011
investment balance december 31, 2010
Parent investment in Subsidiary on Oct 1, 2011
Add: 2010 income from subsidiary
10%x net income 2010 x 1 year
Less: Dividend 2010 -10% x 8000

ec. 31- 2012

r this acquisition.
Add: 2011 income from subsidiary
10%x net income 2011 x 9/12
35%x net income 2011 x 3/12
Less: Dividend 2011 - (10% x 14000)*9/12
Dividend 2011 - (35% x 14000)*3/12
Parent investment in Subsidiary on Dec. 31 2011
b.

Jan 2, 2010

investment in SDRY

Dec 31,2010

cash

Oct 1, 2011

investment in SDRY

Adjustment for changing method from cost to equity

Dec 31, 2011
Investment in subsidiary
Income from subsidiary
Income from subsidiary
Investment in subsidiar
Investment in subsidiary
Income from subsidiary
Income from subsidiary
Investment in subsidiar
Apr 2, 2012
investment in SDRY

Adjustment for changing method from cost to equity

Dec 31, 2012
Investment in subsidiary

Income from subsidiary

Income from subsidiary
Investment in subsidiar

ubsidiary on Dec 31, 2010

Subsidiary
n Dec. 31 2010

Parent investment in Subsidiary on Dec 31, 2012

10000
10000

Parent brought 25% ownership of Subsidiary

investment balance december 31, 2011

ubsidiary on Dec 31, 2011

n Oct 1, 2011

Add: 2012 income from subsidiary

35%x net income 20102 x 3/12
60%x net income 2012 x 9/12

10000
28000
38000

Less: Dividend 2012 - (35% x 15000)*3/12

Dividend 2012 - (60% x 15000)*9/12

2000
800
1200
39200

% x 14000)*3/12

n Dec. 31 2011

nvestment in SDRY
cash

Parent investment in Subsidiary on Dec. 31 2012

1650
1925
3575
1050
1225
2275
40500
10000

entry pembelian
10000

800
dividend income

nvestment in SDRY
cash

terima dividen
800

28000

ng method from cost to equity

nvestment in subsidiary
Income from subsidiary
ncome from subsidiary
Investment in subsidiary
nvestment in subsidiary
Income from subsidiary
ncome from subsidiary
Investment in subsidiary
nvestment in SDRY
cash
ng method from cost to equity
nvestment in subsidiary

28000

2000
2000
800
800
3575
3575
2275
2275
30000
30000
16125

Income from subsidiary

ncome from subsidiary
Investment in subsidiary

16125
8062.5
8062.5

30000
40500
70500
2625
13500
16125
1312.5
6750
8062.5
78562.5

E2
On March 1, 2010 the owner of PRNT corporation acquired SDRY company stocks by issuing its 3000 s
par $10 from 5000 PRNT outstanding stocks when the market value of the stock was $15. The book va
SDRY assets was $60000 and book value of liabilities $25000, but the market value of the asset was
$65000.
Required: a. Prepare all necessary entries to record the acquisition.
b. Explain what do you understand about the change of ownership interest for this acqu
subsidiary menjadi parent dan parent menjadi subsidiary

a.
b.

no entry
if the owners' parent company buy subsidiary with stock more than 50%, the controlling int
so subsidiary will become the parent and the parent will become subsidiary

ocks by issuing its 3000 stocks

ock was $15. The book value of
value of the asset was

hip interest for this acquisition.

n 50%, the controlling interest will change into the subsidiary

E3
On March 1, 2010 PRNT corporation acquired SDRY company by issuing additional 3000 stocks
par $10 from 5000 outstanding stocks when the market value of the stock was $15. The book value of
SDRY assets was $60000 and book value of liabilities $25000, but the market value of the asset was
$65000. SDRY was then dissolved.
Required: a. Prepare all necessary entries to record the acquisition.
b. Explain what do you understand about the change of ownership interest for this acqu
subsidiary hilang dan digabungkan jd parent
a.

b.

investment in SDRY
45
paid in capital
30
common stock
15
if the owners' parent company buy subsidiary with stock more than 50%, the controlling int
so subsidiary will disappear and parent will do consolidated statement

tional 3000 stocks

s $15. The book value of
value of the asset was

hip interest for this acquisition.

n 50%, the controlling interest will change into the subsidiary