Question

In: Accounting

On Janaury 1, 2016 PJ Co. acquired 25% interest in AEJR Enterprises for $307,500. The price...

On Janaury 1, 2016 PJ Co. acquired 25% interest in AEJR Enterprises for $307,500. The price reflected the assessment that all AEJR's assets and liabilities were stated at fair value. During 2016 AEJR reported net income of $160,000 and paid dividends of $40,000. PJ Co. uses the equity method to account for its investment in AEJR Enterprises.

On January 1, 2017 PJ Co. acquired an additional 50% of AEJR Enterprises for $800,000. At the time of this second acquisition, PJ determined that AEJR had a recently negotiated customer contract with a fair value of $200,000 that was not recorded on its books. This contract had a remaining life of 4 years at the time of acquisiton. In 2017 AEJR had revenues of $400,000, expenses of $250,000 and paid dividends of $48,000. PJ Co. had revenues of $950,000 and expenses of $650,000 before any income related to its investment in AEJR Enterprises.

. Prepare all journal entries PJ Company would make on 1/1/2017 with the acquisition of an additional

      50 % of AEJR Enterprises. SHOW ALL WORK IN SUPPORT OF YOUR ANSWER.

b. What is the non controlling interest's share of AEJR Enterprises net income in 2017?

c. What is the value of the non controlling interest on the consolidated balance sheet as of 12/31/2017? SHOW ALL

     WORK IN SUPPORT OF YOUR ANSWER.

d. What is consolidated net income after allocation of income to the non controlling interest? SHOW ALL WORK IN

      SUPPORT OF YOUR ANSWER.

Solutions

Expert Solution

To understand the implications more effectively, let's start from the 1.1.2016

Journal entries in the books of PJ Co.

1. Dr. Investment in AEJR Enterprises 307500

Cr. Cash and Cash Equivalents. 307500

2. Dr. Investment in AEJR Enterprises 40000 (160000 * 25%)

Cr. Revenue from Investment 40000

3. Dr. Cash and Cash Equivalents 10000 (40000*25%)

Cr. Investment in AEJR Enterprises. 10000

So now as on 31-12-2016 value of investment in AEJR Enterprises is $337500   

To start with your question a.   

Journal entries in the books of PJ Co. on 1-1-2017

1. Dr. Investment in AEJR Enterprises 800000

Cr. Cash and Cash Equivalents. 800000

Answer to your question b.

Net Income for the year = $150000 (400000-250000)

share of Non controlling interest = (since 75% is held by PJ Co.) 25%*150000

= $37500

Answer to your question d.

Consolidated Net Income = Income of PJ Co. + share of PJ Co. in AEJR

= (950000-650000) + (150000 * 75%)

= 300000 + 112500

= $412500

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

2. On January 1 Criquet Co. acquired an interest in the Tamlee Co. for $500,000. At...
2. On January 1 Criquet Co. acquired an interest in the Tamlee Co. for $500,000. At December 31, Tamlee Co. declared and paid a cash dividend of $50,000 and reported a net income of $160,000. REQUIRED: Prepare the journal entries for the Criquet Co. under each of the independent circumstances: a. Criquet Co. acquires a 10% interest in the Tamlee Co. b. Criquet Co. acquires a 25% interest in the Tamlee Co.
On January 1 Criquet Co. acquired an interest in the Tamlee Co. for $500,000. At December...
On January 1 Criquet Co. acquired an interest in the Tamlee Co. for $500,000. At December 31, Tamlee Co. declared and paid a cash dividend of $50,000 and reported a net income of $160,000. REQUIRED: Prepare the journal entries for the Criquet Co. under each of the independent circumstances: a. Criquet Co. acquires a 10% interest in the Tamlee Co. b. Criquet Co. acquires a 25% interest in the Tamlee Co.
Damon, Inc., acquired 25% of Jolie Enterprises for $8,000,000 on October 1, 2018. The total fair...
Damon, Inc., acquired 25% of Jolie Enterprises for $8,000,000 on October 1, 2018. The total fair value of Jolie's identifiable net assets was $27,000,000 on that date, and the total book value of those net assets was $23,000,000. The difference between fair value and book value is attributed to equipment that has a remaining useful life of 4 years. During 2018 Jolie recognized net income of $2,000,000 and paid dividends of $1,200,000 ($300,000 per quarter). Jolie had a fair value...
On 1 July 2017 Miller Ltd acquired a 25% interest in Thomas Ltd for consideration of...
On 1 July 2017 Miller Ltd acquired a 25% interest in Thomas Ltd for consideration of $73,000. At that date the equity of Thomas Ltd consisted of: Share Capital 140 000 Retained Earnings 70 000 Asset Revaluation Surplus 12 000   Total 222 000 All assets and liabilities of Thomas Ltd are recorded at fair value with the exception of inventory which was held at $5,000 below its fair value. The entire inventory was sold during the 2017-2018 financial year. The...
3.On January 1, 2016, Fuller Company acquired a 80% interest in Wilson Company for a purchase...
3.On January 1, 2016, Fuller Company acquired a 80% interest in Wilson Company for a purchase price that was $240,000 over the book value of the Wilson’s Stockholders’ Equity on the acquisition date. Fuller uses the equity method to account for its investment in Wilson. Fuller assigned the acquisition-date AAP as follows: AAP Items Initial Fair Value Useful Life (years) PPE, net $150,000 20 Patent    90,000 15 $240,000 Wilson sells inventory to Fuller (upstream) which includes that inventory in products...
On January 1, 2016, Acorn company acquired an 80% interest in Bengal company’s voting stock for...
On January 1, 2016, Acorn company acquired an 80% interest in Bengal company’s voting stock for $288,000. On that date Bengal had a $300,000 book value and the fair value of the non-controlling interest was $72,000. On January 1, 2017, Bengal acquired 80% of Canaris Company for $104,000 when Canaris had a $100,000 book value and the value of the non-controlling interest was $26,000. In each acquisition, the excess of fair value over book value was assigned to Tradename with...
On January 1, 2011, John Doe Enterprises (JDE) acquired a 55% interest in Bubba Manufacturing, Inc....
On January 1, 2011, John Doe Enterprises (JDE) acquired a 55% interest in Bubba Manufacturing, Inc. (BMI). JDE paid for the transaction with $3 million cash and 500,000 shares of JDE common stock (par value $1.00 per share). At the time of acquisition, BMI's book value was $16,970,000. On January 1, JDE stock had a market value of $14.90 per share and there was no control premium in this transaction. Any consideration transferred over book valu is assigned to goodwill....
Miller Company acquired an 80 percent interest in Taylor Company on January 1, 2016. Miller paid...
Miller Company acquired an 80 percent interest in Taylor Company on January 1, 2016. Miller paid $896,000 in cash to the owners of Taylor to acquire these shares. In addition, the remaining 20 percent of Taylor shares continued to trade at a total value of $224,000 both before and after Miller’s acquisition.On January 1, 2016, Taylor reported a book value of $626,000 (Common Stock = $313,000; Additional Paid-In Capital = $93,900; Retained Earnings = $219,100). Several of Taylor’s buildings that...
Miller Company acquired an 80 percent interest in Taylor Company on January 1, 2016. Miller paid...
Miller Company acquired an 80 percent interest in Taylor Company on January 1, 2016. Miller paid $896,000 in cash to the owners of Taylor to acquire these shares. In addition, the remaining 20 percent of Taylor shares continued to trade at a total value of $224,000 both before and after Miller’s acquisition. On January 1, 2016, Taylor reported a book value of $406,000 (Common Stock = $203,000; Additional Paid-In Capital = $60,900; Retained Earnings = $142,100). Several of Taylor’s buildings...
Miller Company acquired an 80 percent interest in Taylor Company on January 1, 2016. Miller paid...
Miller Company acquired an 80 percent interest in Taylor Company on January 1, 2016. Miller paid $768,000 in cash to the owners of Taylor to acquire these shares. In addition, the remaining 20 percent of Taylor shares continued to trade at a total value of $192,000 both before and after Miller’s acquisition. On January 1, 2016, Taylor reported a book value of $616,000 (Common Stock = $308,000; Additional Paid-In Capital = $92,400; Retained Earnings = $215,600). Several of Taylor’s buildings...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT