Smith, Inc., has the following stockholders’ equity accounts as of January 1, 2018: Preferred stock—$100 par,...

Smith, Inc., has the following stockholders’ equity accounts as of January 1, 2018:


Preferred stock—$100 par, nonvoting and nonparticipating, 6% cumulative dividend	$	2,230,000
Common stock—$20 par value		4,230,000
Retained earnings		10,230,000

Haried Company purchases all of Smith's common stock on January 1, 2018, for $14,520,000. The preferred stock remains in the hands of outside parties. Any excess acquisition-date fair value will be assigned to franchise contracts with a 40-year remaining life

During 2018, Smith reports earning $680,000 in net income and declares $590,000 in cash dividends. Haried applies the equity method to this investment. a.What is the noncontrolling interest's share of consolidated net income for this period? b.What is the balance in the Investment in Smith account as of December 31, 2018? c.What consolidation entries are needed for 2018?

Prepare Entry S and A to eliminate the subsidiary stockholders' equity, record excess fair values, and to record the outside ownership of the subsidiary's preferred stock at fair value.

Prepare Entry I to eliminate the equity accrual made in connection with common stock along with the excess amortization recorded by the parent.

Prepare Entry D to remove the intra-entity dividend declarations made on common stock.

Prepare Entry E to recognize the amortization of franchises for the current year.

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Expert Solution

ekkarill92 answered 1 year ago

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