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Assume that Brown Company owns 100% of Schroeder Corporation. Schroeder reports Stockholders’ Equity of $500,000. The...

Assume that Brown Company owns 100% of Schroeder Corporation. Schroeder reports Stockholders’ Equity of $500,000. The Equity investment was acquired at book value (i.e., no AAP). Schroeder sells a 10% interest to outsiders for $115,000. The entry made by Brown as a result of the sale of stock by Schroeder includes:

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Expert Solution

Difference between the book value and sales proceeds is adjusted to the brown company's owner's equity because control is maintained after the sale transaction.
Schroeder reports Stockholders’ Equity of $500,000 $        500,000
Multiply: Sale of interest 10.00%
Book value of share of investment $          50,000
10% investment sold at value of $        115,000
Less: Book value of share of investment $        (50,000)
Less: 10% Non controlling share in value of sold $        (11,500)
Adjustment to the parent's owners' equity (APIC) $          53,500
Adjustment to the parent's owners' equity (APIC) credited to $          53,500

ekkarill92 answered 1 year ago
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