On January 1, 2014, Paterson Company purchased 70% of the common stock of Smith Company for...

On January 1, 2014, Paterson Company purchased 70% of the common stock of Smith Company for $420,000. At that time, Smith’s stockholders’ equity consisted of $80,000 of Common stock, $60,000 of Other contributed capital, and $240,000 of Retained earnings. Any difference between implied and book value relates to Smith’s land. Paterson uses the cost method to record its investment in Smith. Its fiscal year ends on December 31. Additional information for both companies for 2020 follows:

	Paterson	Smith
Common stock	300,000	80,000
Other contributed capital	120,000	60,000
Retained earnings, 1/1/2020	240,000	240,000
Net income for 2020	262,000	164,000
Dividends declared in 2020	40,000	16,000

Required:

A)Prepare all the necessary eliminating entries on a consolidated statements workpaper on 12/31/2020.

B) Calculate the consolidated net income for 2020.

C) Calculate the non controlling interest in net income for 2020.

Expert Solution

ekkarill92 answered 1 year ago

On January 1, 2014, Pert Company purchased 85% of the outstanding common stock of Sales Company...

On January 1, 2014, Pert Company purchased 85% of the outstanding common stock of Sales Company for$350,000.On that date, Sales Company’s stockholders’ equity consisted of common stock, $100,000; other con-tributed capital, $40,000; and retained earnings, $140,000. Pert Company paid more than the book value of netassets acquired because the recorded cost of Sales Company’s land was significantly less than its fair value.During 2014 Sales Company earned $148,000 and declared and paid a $50,000 dividend. Pert Companyused the partial equity method...

On May 1, 2020, Peters Company purchased 80% of the common stock of Smith Company for...

On May 1, 2020, Peters Company purchased 80% of the common stock of Smith Company for $50,000. Additional data concerning these two companies for the years 2020 and 2021 are: 2020 2021 Peters Smith Peters Smith Common stock $100,000 $25,000 $100,000 $25,000 Other contributed capital 40,000 10,000 40,000 10,000 Retained earnings, 1/1 80,000 10,000 129,000 53,000 Net income (loss) 64,000 45,000 37,500 (5,000) Cash dividends (11/30) 15,000 2,000 5,000 —0— Any difference between book value and the value implied by...

Park Company purchased 90% of the stock of Salt Company on January 1, 2014, for $465,000,...

Park Company purchased 90% of the stock of Salt Company on January 1, 2014, for $465,000, an amount equal to $15,000 in excess of the book value of equity acquired. This excess payment relates to an undervaluation of Salt Company’s land. On the date of purchase, Salt Company’s retained earnings balance was $50,000. The remainder of the stockholders’ equity consists of no-par common stock. During 2018, Salt Company declared dividends in the amount of $10,000, and reported net income of...

Pearson Company owns 90% of the outstanding common stock of Spring Company. On January 1, 2014,...

Pearson Company owns 90% of the outstanding common stock of Spring Company. On January 1, 2014, Spring Company sold equipment to Pearson Company for $206,850. Spring Company had purchased the equipment for $316,700 on January 1, 2009, and had depreciated it using a 10% straight-line rate. The management of Pearson Company estimated that the equipment had a remaining useful life of five years on January 1, 2014. In 2015, Pearson Company reported $163,200 and Spring Company reported $107,300 in net...

On January 1, Year 4, Handy Company (Handy) purchased 70% of the outstanding common shares of...

On January 1, Year 4, Handy Company (Handy) purchased 70% of the outstanding common shares of Dandy Limited (Dandy) for $7,000. On that date, Dandy’s shareholders’ equity consisted of common shares of $390 and retained earnings of $5,900. The financial statements for Handy and Dandy for Year 9 were as follows: BALANCE SHEETS At December 31, Year 9 Handy Dandy Cash $ 1,480 $ 920 Accounts receivable 2,940 1,190 Inventory 3,540 3,060 Property, plant, and equipment—net 4,480 3,150 Investment in...

On January 1, 2011, Parent Company Purchased 80% of the common stock of Subsidiary Company for...

On January 1, 2011, Parent Company Purchased 80% of the common stock of Subsidiary Company for $402,000. On this date, Subsidiary had total owners' equity of $440,000. Land was undervalued by $20,000, Equipment with a 5-year remaining life was undervalued by $15,000 and inventory was undervalued by $10,000. Any other excess of cost over book value is due to goodwill. Parent accounts for its investment in Subsidiary using the simple equity method. 1) Prepare the Determination and Distribution of Excess...

On January 1, 20X8, Parent Company purchased 75% of the common stock of Subsidiary Company for...

On January 1, 20X8, Parent Company purchased 75% of the common stock of Subsidiary Company for $360,000. On this date, Subsidiary had common stock, other paid in capital, and retained earnings of $20,000, $130,000, and $200,000, respectively. Any excess of cost over book value is due to goodwill. Parent accounts for the Investment in Subsidiary using cost method. On January 1, 20X8, Subsidiary sold $100,000 par value of 6%, ten-year bonds for $97,000. The bonds pay interest semi-annually on January...

On January 1, 2020, Parent Company purchased 80% of the common stock of Subsidiary Company for...

On January 1, 2020, Parent Company purchased 80% of the common stock of Subsidiary Company for $320,000. On this date, Subsidiary had common stock, other paid-in capital, and retained earnings of $40,000, $120,000, and $190,000, respectively. Net income and dividends for Subsidiary Company were $50,000 and $10,000, respectively. Parent Company has used the simple equity method for recording the Subsidiary income and dividends. On January 1, 2020, the only tangible assets of Subsidiary that were undervalued were inventory and equipment....

On January 1, 2014, Petunia Company purchased an 85% interest im the captial stock of sunflower...

On January 1, 2014, Petunia Company purchased an 85% interest im the captial stock of sunflower Company for $3,400 (Cash + Shares of Petunia Company). Petunia Company uses the equity method to record its investment in Sunflower Company. The plant is undervalued by 700 (7 year remaining life) and the equipment is overvalued by 200 (10 year remaining life) on January 1, 2014. Prepare the journal entry to eliminate any income earned from Sunflower Corporation during 2014 Prepare the journal...

Exercise 4-8 On May 1, 2015, Peters Company purchased 80% of the common stock of Smith...

Exercise 4-8 On May 1, 2015, Peters Company purchased 80% of the common stock of Smith Company for $53,100. Additional data concerning these two companies for the years 2015 and 2016 are: 2015 2016 Peters Smith Peters Smith Common stock $103,300 $27,200 $103,300 $27,200 Other contributed capital 38,900 9,000 38,900 9,000 Retained earnings, 1/1 72,100 10,100 115,800 53,000 Net income (loss) 58,300 44,700 39,400 (5,300 ) Cash dividends (11/30) 14,600 1,800 4,700 —0— Any difference between book value and the...

Question