Question
In: Finance
When valuing a parent company that owns less than 100 percent of a subsidiary, the minority...
When valuing a parent company that owns less than 100 percent of a subsidiary, the minority interest holder of the subsidiary has a claim on the parent company’s assets. A. True B. False
Solutions
Expert Solution
When valuing a parent company that owns less than 100 percent of a subsidiary, the minority interest holder of the subsidiary has a claim on the parent company’s assets.
Answer: False
whenever a parent company owns a controlling interest in a subsidiary but does not own 100 percent, a minority interest exists, and they have a claim on the earnings and net assets of the subsidiary and not the Parent Company's Assets and earnings.
For eg:
if Co. A is the holding Co. (70% stake) of subsidiary Co. B, then the minority interests i.e. remaining shareholders (30% of total shares) will have a 30% claim on the earnings and net assets of the subsidiary i.e Co. B
jeff jeffy answered 2 years agoRelated Solutions
Assume that a parent company owns 80 percent of its subsidiary. The parent company uses the...
Assume that a parent company owns 80 percent of its subsidiary.
The parent company uses the equity method to account for its
investment in subsidiary. On January 1, 2012, the parent company
issued to an unaffiliated company $1,000,000 (face value) 10 year,
10 percent bond payable for a $61,000 premium. The bonds pay
interest in December 31 of each year. On January 1, 2015, the
subsidiary acquired 40 percent of the bonds for $386,000. Both
companies use straight-line amortization.
In...
Assume that a parent company owns 80 percent of its subsidiary. The parent company uses the...
Assume that a parent company owns 80 percent of its subsidiary.
The parent company uses the equity method to account for its
investment in subsidiary. On January 1, 2012, the parent company
issued to an unaffiliated company $1,000,000 (face value) 10 year,
10 percent bond payable for a $61,000 premium. The bonds pay
interest in December 31 of each year. On January 1, 2015, the
subsidiary acquired 40 percent of the bonds for $386,000. Both
companies use straight-line amortization. In...
Assume that a parent company owns 80 percent of its subsidiary. The parent company uses the...
Assume that a parent company owns 80 percent of its subsidiary.
The parent company uses the equity method to account for its
investment in subsidiary. On January 1, 2012, the parent company
issued to an unaffiliated company $1,000,000 (face value) 10 year,
10 percent bond payable for a $61,000 premium. The bonds pay
interest in December 31 of each year. On January 1, 2015, the
subsidiary acquired 40 percent of the bonds for $386,000. Both
companies use straight-line amortization.
In...
Assume that a parent company owns 80 percent of its subsidiary. The parent company uses the...
Assume that a parent company owns 80 percent of its subsidiary.
The parent company uses the equity method to account for its
investment in subsidiary. On January 1, 2012, the parent company
issued to an unaffiliated company $1,000,000 (face value) 10 year,
10 percent bond payable for a $61,000 premium. The bonds pay
interest in December 31 of each year. On January 1, 2015, the
subsidiary acquired 40 percent of the bonds for $386,000. Both
companies use straight-line amortization.
In...
A parent company acquired 100 percent of the stock of a subsidiary company on January 1,...
A parent company acquired 100 percent of the stock of a
subsidiary company on January 1, 2013, for $800,000. On this date,
the balances of the subsidiary’s stockholders’ equity accounts were
Common Stock, $50,000, Additional Paid-in Capital, $55,000, and
Retained Earnings, $195,000. On the acquisition date, the excess
was assigned to the following AAP assets:
Original Amount
Original Useful Life
Property, plant & equipment
300,000
10
years
Customer list
200,000
8
years
Royalty agreement
180,000
8
years
Goodwill
120,000
Indefinite...
Parent owns 100% of subsidiary. The two corporations have the following balance sheet. Assets Parent...
Parent owns 100% of subsidiary.
The two corporations have the following balance sheet.
Assets
Parent
Subsidiary
General assets
1,500,000
750,000
Investment in Subsidiary
200,000
Note receivable from Subsidiary
1,000,000
Total
2,700,000
750,000
Liabilities and Equity
General liabilities
1,500,000
150,000
Note payable to parent
1,000,000
Common Stock
300,000
200,000
Retained Earnings (deficit)
900,000
-600,000
Total
2,700,000
750,000
Parent’s basis in Subsidiary stock is $200,000. The corporations
do not file a consolidated tax return.
Prior to liquidation, Subsidiary...
A parent company paid $500,000 for a 100% interest in a subsidiary. At the end of...
A parent company paid $500,000 for a 100% interest in a
subsidiary. At the end of the first year, the subsidiary reported
net income of $40,000 and paid $5,000 in dividends. The price paid
reflected understated equipment of $70,000, which will be amortized
over 10 years.
What would be the subsidiary income reported on the parent's
unconsolidated income statement, and what would the parent's
investment balance be at the end of the first year under each of
these methods?
a....
1) When the percent recovery is less than 100%, where is most of the uncovered material...
1) When the percent recovery is
less than 100%, where is most of the uncovered material and how
might you go about recovering it if you needed to? (three of fewer
sentences)
2) Hot filtration was not necessary in the recrystallization of
phthalic acid but was necessary in the recrystallization of
naphthalene. Why was it necessary in the recrystallization of
naphthalene?
Both of these are about a recrystallization experiment.
Parent Company owns a controlling share of Subsidiary company's common stock. During 2017 and 2018, Parent...
Parent Company owns a controlling share of Subsidiary company's
common stock. During 2017 and 2018, Parent sold inventory to
Subsidiary company. The sales and cost of sales information
are detailed below. There were no intercompany
sales prior to 2017. In both 2017 and 2018, Subsidiary
sold 80% of the intercompany inventory purchased in that year. In
2018, all the beginning inventory was sold first.
Ownership Percentage 75%
2017 intercompany sales $550,000
2018 intercompany sales $470,000
2017 Cost of Goods Sold...
A parent sells land costing $4,000,000 to a subsidiary in 2019 for $4,500,000. The parent owns...
A parent sells land costing $4,000,000 to a subsidiary in 2019
for $4,500,000. The parent owns 80% of the subsidiary. Suppose the
subsidiary sells the land to an outside party in 2021 for
$5,200,000. What is the effect of the $500,000 intercompany profit
confirmed in the year of sale to the outside party on Equity in Net
Income and the 20% Noncontrolling Interest in Net Income?
Select one:
a. Add $500,000 to Equity in Net Income; No effect on the...
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