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Homework Ch. 7 and 13
Homework Ch. 7 and 13
Homework Ch. 7 and 13
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Baxter, Inc., owns 90 percent of Wisconsin, Inc., and 20 percent of Cleveland Company. Wisconsin, in turn, holds 60 percent o
During this same period, Wisconsin sold merchandise to Baxter for $100,000 although the original cost was only $70,000. At y
The initial value method was used to record each of these investments. None of the companies holds any other investments.
Using the following separate income statements, determine the figures that would appear on a consolidated income statemen
NONCONTROLLING INTERESTS:
Cleveland:
Operating income (sales minus cost of goods sold and expenses) 60,000
Defer intra-entity gross profit (above) (3,000)
Accrual-based net income—Cleveland 57,000
Outside ownership 20%
Noncontrolling interest in Cleveland's net income 11,400
Wisconsin:
Operating income (sales minus cost of goods sold and expenses) 110,000
Defer intra-entity
Investment income gross
(60%profit (above) accrual-based
of Cleveland's (12,000)
income of $57,000) 34,200
Accrual-based net income—Wisconsin 132,200
Outside ownership 10% 13,220
CONSOLIDATED TOTALS:
Sales = $1,590,000 (add the three book values and eliminate intra-entity 1,590,000
Cost of goods sold 1,015,000
Expenses 200,000
Dividend income 0
Consolidated net income 375,000
Noncontrolling interests in subsidieir's income 24,620
Controlling interest in colodiated net income 350,380
Explanation
INTRA-ENTITY GROSS PROFIT:
Cleveland ($12,000 remaining inventory × 25% markup) = $3,000
Wisconsin ($40,000 remaining inventory × 30% markup) = $12,000
NONCONTROLLING INTERESTS:
CLEVELAND:
CONSOLIDATION TOTALS
Sales = $1,590,000 (add the three book values and eliminate intra-entity transfers of $40,000 and $100,000)
Cost of goods sold = $1,015,000 (add the three book values, eliminate intra-entity transfers of $40,000 and $100,000, and defe
Expenses = $200,000 (add the three book values)
Dividend income = 0 (eliminated for consolidation purposes)
Consolidated net income = $375,000 (consolidated revenues less consolidated cost of goods sold and expenses)
Net income attributable to noncontrolling interest = $24,620 (above)
Net income attributable to Baxter Company = $350,380 (consolidated net income less noncontrolling interest share)
nsin, in turn, holds 60 percent of Cleveland's outstanding stock. No excess amortization resulted from these acquisitions. During the curren
nal cost was only $70,000. At year-end, $40,000 of these goods (at the transfer price) was still on hand.
ld and expenses)
Garrison holds a controlling interest in Robertson's outstanding stock. For the current year, the following information has been
Garrison Robertson
Separate operating income 300,000 200,000
(includes $50,000 intra-entity gross profit in ending inventory)
Dividends paid 32,000 50,000
Tax rate 40% 40%
Garrison uses the initial value method to account for the investment in Robertson. Garrison's separate operating income figur
a. Assume that Garrison owns 80 percent of Robertson's voting stock. On a consolidated tax return, what amount of income ta
b. Assume that Garrison owns 80 percent of Robertson's voting stock. On separate tax returns, what total amount of income t
c. Assume that Garrison owns 70 percent of Robertson's voting stock. What total amount of income tax expense does a conso
d. Assume that Garrison holds 60 percent of Robertson's voting stock. On a separate income tax return, what amount of incom
c. Robertson must report an income tax expense of $80,000 or 40% of its $200,000 operating income. Garrison records its exp
80,000 250,000
120,000 100,000
84,000
6,720
at a 40% rate, the tax on the dividends would amount to $2,400 ($6,000 × 40%). The total income taxes payable by Garrison is
($120,000 + $2,400).
120,000
30,000
2,400
a.
The affiliated group would be taxed on its operating income of $450,000 (the $50,000 intra-entity gain is deferred). Intra-entit
b. Total taxes to be paid are $200,000. Robertson would have to pay $80,000 or 40% of its $200,000 operating income. Garriso
c. Robertson must report an income tax expense of $80,000 or 40% of its $200,000 operating income.
Garrison records its expense based on the revenue recognized during the period. Thus, the expense is computed on an operati
d. Garrison will pay $120,000 in connection with its operating income ($300,000 × 40%) and $2,400 because of the dividends r
ons-voting-stock-What-total/
parate operating income figure does not include dividend income for the current year.
ome. Garrison records its expense based on the revenue recognized during the period. Thus, the expense is computed on an operating inc
000 operating income. Garrison would pay $120,000 or 40% of its $300,000 operating income. The intra-entity gain is not deferred becaus
nse is computed on an operating income of $250,000 (the net intra-entity gain is not recognized in this period) along with equity income f
00 because of the dividends received from Robertson. Garrison will receive $30,000 in dividends based on its 60% ownership. Of this tota
computed on an operating income of $250,000 (the net unrealized gain is not recognized in this period) along with equity income from Ro
tity gain is not deferred because separate returns are being filed. Intra-entity dividends are not taxable because the parties still qualify as a
d) along with equity income from Robertson of $84,000 (70% of that company's $120,000 after-tax income). Garrison will record an incom
s 60% ownership. Of this total, only $6,000 (20%) is taxable. Thus, at a 40% rate, the tax on the dividends would amount to $2,400 ($6,000
ng with equity income from Robertson of $84,000 (70% of that company's $120,000 after-tax income). Garrison will record an income tax e
use the parties still qualify as an a ffiliated group even though separate returns are being filed.
. Garrison will record an income tax expense of $100,000 in connection with the operating income ($250,000 × 40%) and $6,720 resulting
ould amount to $2,400 ($6,000 × 40%). The total income taxes payable by Garrison is $122,400 ($120,000 + $2,400).
son will record an income tax expense of $100,000 in connection with the operating income ($250,000 × 40%) and $6,720 resulting from it
0 × 40%) and $6,720 resulting from its equity income ($84,000 × 20% × 40%). Total expense to be reported amounts to $186,720 for Garris
%) and $6,720 resulting from its equity income ($84,000 × 20% × 40%). Total expense to be reported amounts to $186,720 for Garrison and
mounts to $186,720 for Garrison and Robertson ($80,000 + $100,000 + $6,720).
s to $186,720 for Garrison and Robertson ($80,000 + $100,000 + $6,720).
https://oneclass.com/homework-help/accounting/126329-chesterfield-company-holds-cash.en.html
Chesterfield Company holds cash of $60,000, inventory worth $110,000, and a building worth $140,000. Unfortunately, the co
In a Chapter 7 bankruptcy, how much money will the holder of the bond expect to receive?
12,000
unsecured liabilities:
accounts payable 190,000
bonds payable (excess value of secured by building) 30,000
total 220,000
52,000
94,000
132,000
278,000
182,000
82,000 secured by inv 94,000
13,000
154,000 sec. by build 132,000
13,000
22,000
the inventory), liabilities with priority of $22,800, and a bond payable of $170,000 (secured by the building).
The Larisa Company is exiting bankruptcy reorganization with the following accounts:
The company's assets have a $760,000 reorganization value. As part of the reorganization, the company's owners transferred
Prepare the journal entry that is necessary to adjust the company's records to fresh start accounting.
Receivables 10,000
Inventory 10,000
Buildings 100,000
Goodwill 60,000
Retained earnings -70,000
Additional paid-in capital 110,000
e company's owners transferred 80 percent of the outstanding stock to the creditors.