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Question: Truck Company owns a 90% interest in


Truck Company owns a 90% interest in Trailer Company on January 1, 2015, when Trail has the following stockholders’ equity:


Common stock ($10 par). . . . . . . . . . . . . . . . . . . . . $100,000
Paid-in capital in excess of par . . . . . . . . . . . . . . . . 250,000
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000
Total stockholders’ equity. . . . . . . . . . . . . . . . . . . $550,000


The investment is purchased for book value, $495,000.
On July 1, 2015, Trail sells 2,000 additional shares to noncontrolling shareholders in a private offering for $75 per share. Trailer’s net income for 2015 is $70,000, and the income is earned evenly during the year.
Truck uses the simple equity method to record the investment in Trailer. Summary entries are made each December 31 to record the year’s activity.
Prepare Truck’s equity adjustments for 2015 that result from the above activities of Trailer Company during 2011. Assume Truck has $500,000 of paid-in capital in excess of par.


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> Lakecraft Company has the following balance sheet on December 31, 2015, when it is acquired for $950,000 in cash by Argo Corporation: All assets have fair values equal to their book values. The combination is structured as a tax free exchange. Lakecraf

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> On December 31, 2014, Zigler Corporation purchases an 80% interest in the common stock of Kim Company for $420,000. The stockholders’ equity of Kim Company on December 31, 2014, is as follows: 8% Cumulative preferred stock (2,000 shares, $100 par) . . .

> Brian Construction Company has the following stockholders’ equity on January 1, 2015, the date on which Roller Company purchases an 80% interest in the common stock for $720,000: 8% cumulative preferred stock (5,000 shares, $100 par) . . . . . . . . . .

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> Carpenter Company has the following balance sheet on December 31, 2015: The investment in Hinckley Company account reflects the original cost of an 80% interest (40,000 shares) purchased on January 1, 2012. On the date of the purchase, Hinckley stock

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> Baker Corporation purchases a 60% interest in Hardee Company on January 1, 2015, for $135,000. On that date, Hardee Company has the following stockholders’ equity: Common stock ($10 par). . . . . . . . . . . . . . . . $100,000 Retai

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> Refer to the preceding information for Paulcraft’s acquisition of Switzer’s common stock. Assume that Paulcraft pays $420,000 for 100% of Switzer common stock. Paulcraft uses the simple equity method to account for its

> The separate income statements of Coors Company and its 60% owned subsidiary, Vespa Company, for the year ended December 31, 2017, are as follows: The following additional information is available: a. Coors Company acquires its interest in Vespa Co

> (This is the same as Exercise 5 but with separate taxation.) Dunker Company purchases an 80% interest in the common stock of Fennig Company for $850,000 on January 1, 2017. The fair value of the NCI is $212,500. At the time of the purchase, the total sto

> Deko Company purchases an 80% interest in the common stock of Farwell Company for $850,000 on January 1, 2017. At the time of the purchase, the total stockholders’ equity of Farwell is $968,750. The fair value of the NCI is $212,500. Th

> On May 1, 2016, Tole Company acquires a 80% interest in Marco Company for $400,000. The fair value of the NCI is $100,000. The following determination and distribution of excess schedule is prepared: Goodwill, applicable to the parentâ€&#15

> Paridon Motors purchases an 80% interest in Snap Battery Company on January 1, 2012, for $700,000 cash. At that date, Snap Battery Company has the following stockholders’ equity: Common stock ($10 par). . . . . . . . . . . . . . . . . . . . . . $100,00

> Duckworth Corporation purchases an 80% interest in Panda Corporation on January 1, 2017, in exchange for 5,000 Duckworth shares (market value of $18) plus $155,000 cash. The fair value of the NCI is proportionate to the price paid by Duckworth for its in

> Avery Company acquires the net assets of Iowa Company on July 1, 2015. The net assets acquired include plant assets that are provision all estimated to have a fair value of $600,000 with a 10-year usable life and no salvage value. Depreciation is recorde

> Born Company acquires an 80% interest in Roland Company for $660,000 cash on January 1, 2017. The NCI has a fair value of $165,000. Any excess of cost over book value is attributed to goodwill. To help pay for the acquisition, Born Company issues 5,000 s

> The Auto Clinic is a wholly owned subsidiary of Fast-Check Equipment Company. Fast-Check Equipment sells and leases 4-wheel alignment machines. The usual selling price of each machine is $35,000; it has a cost to FastCheck Equipment of $25,000. On Januar

> On January 1, 2015, Traylor Company, an 80%-owned subsidiary of Parker Electronics, Inc., signed a 4-year direct financing lease with its parent for the rental of electronic equipment. The lease agreement requires a $12,000 payment on January 1 of each y

> Detner International purchases 80% of the outstanding stock of Hardy Company for $1,600,000 on January 1, 2015. At the purchase date, the inventory, equipment, and patents of Hardy Company have fair values of $10,000, $50,000, and $100,000, respectively,

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> Linco Industries is a 90%- owned subsidiary of Sharp Incorporated. On January 1, 2015, Linco issued $100,000 of 10- year, 6% bonds for $86,580, to yield 8% interest. Interest is paid annually on January 1. The effective interest method is used to amortiz

> Carlton Company is an 80%- owned subsidiary of Mirage Company. On January 1, 2015, Carlton sold $100,000 of 10-year, 7% bonds for $101,000. Interest is paid annually on January 1. The market rate for this type of bond was 9% on January 2, 2017, when Mira

> On January 1, 2014, Dunbar Corporation, an 85%-owned subsidiary of Garfield Industries, received $48,055 for $50,000 of 8%, 5-year bonds it issued when the market rate was 9%. When Garfield Industries purchased these bonds for $47,513 on January 2, 2016,

> Cardinal Company is an 80%- owned subsidiary of Dove Corporation. Cardinal Company issued $100,000 of 8%, 10-year bonds for $96,000 on January 1, 2011. Annual interest is paid on January 1. Dove Corporation purchased the bonds on January 1, 2015, for $10

> Darcy Company is an 80%-owned subsidiary of Kraco Industries. Darcy Company issued 10-year, 8% bonds in the amount of $1,000,000 on January 1, 2015. The bonds were issued at face value, and interest is payable each January 1. On January, 1, 2017, Kraco I

> Model Engineering is a large corporation with the ability to obtain financing by selling its bonds at favorable rates. Currently, it pays 5% interest on its 10-year bond issues. In the past year, Model acquired an 80% interest in Mercer Industries. Merce

> Norton Corporation agrees to acquire the net assets of Payco Corporation. Just prior to the acquisition, Payco’s balance sheet is as follows: Fair values agree with book values except for the equipment, which has an estimated fair val

> Saratoga Company owns 80% of the outstanding common stock of Windsor Company. On May 1, 2017, Windsor Company arranges a 1-year, $50,000 loan from Saratoga Company. The loan agreement specifies that interest will accrue at the rate of 6% per annum and th

> Peninsula Company owns an 80% controlling interest in Sandbar Company. Sandbar regularly sells merchandise to Peninsula, which then sells to outside parties. The gross profit on all such sales is 40%. On January 1, 2015, Peninsula sells land and a buildi

> Jeter Corporation purchases 80% of the outstanding stock of Super Company for $275,000 on July 1, 2015. Super Company has the following stockholders’ equity on July 1, 2015: Common stock ($5 par). . . . . . . . . . . . . . . . . . . .

> The separate income statements of Danner Company and its 90%-owned subsidiary, Link Company, for the year ended December 31, 2016, are as follows: The following additional facts apply: a. On January 1, 2015, Link Company purchased a building, with a

> Hilton Corporation sold a press to its 80%-owned subsidiary, Agri Fab Inc., for $5,000 on January 1, 2016. The press originally was purchased by Hilton on January 1, 2015, for $20,000, and $6,000 of depreciation for 2015 had been recorded. The fair value

> Wavemasters Inc., owns an 80% interest in Sayner Development Company. In a prior period, Sayner Development purchased a parcel of land for $50,000. During 2015, it constructed a building on the land at a cost of $500,000. The land and building were sold

> On January 1, 2016, Jungle Company sold a machine to Safari Company for $30,000. The machine had an original cost of $24,000, and accumulated depreciation on the asset was $9,000 at the time of the sale. The machine has a 5-year remaining life and will b

> Norco Company is an 80%-owned subsidiary of Victory Corporation. The separate income statements of the two companies for 2016 are as follows: The following facts apply to 2016: a. Norco Company sold $90,000 of goods to Victory Corporation. The gross pr

> Hide Corporation is a wholly owned subsidiary of Seek Company. During 2015, Hide sold all of its production to Seek Company for $400,000, a price that includes a 25% gross profit. 2015 was the first year that such intercompany sales were made. By year-en

> Assume the same facts as in Exercise 11, but in addition, assume that Saratoga is itself in need of cash. It discounts the note received from Windsor at First Bank on July 1, 2017, at a discount rate of 8% per annum. 1. Prepare the entries that both comp

> Sorel is an 80%-owned subsidiary of Pattern Company. The two affiliates had the following separate income statements for 2015 and 2016. Sorel sells at the same gross profit percentage to all customers. During 2015, Sorel sold goods to Pattern for the

> Pederson Company acquires the net assets of Shelby Company by issuing 100,000 of its $1 par value shares of common stock. The shares have a fair value of $20 each. Just prior to the acquisition, Shelby’s balance sheet is as follows: F

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> Sandin Company prepares the following balance sheet on January 1, 2015: On this date, Prescott Company purchases 8,000 shares of Sandin Company’s outstanding stock for a total price of $270,000. Also on this date, the buildings are u

> The trial balances of Parker and Sargent companies of Exercise 7 for December 31, 2016, are presented as follows: Parker Company continues to use the cost method. 1. Prepare all the eliminations and adjustments that would be made on the 2016 consolidat

> Parker Company acquires an 80% interest in Sargent Company for $300,000 in cash on January 1, 2015, when Sargent Company has the following balance sheet: The excess of the price paid over book value is attributable to the fixed assets, which have a fai

> Baker Enterprises purchases an 80% interest in Kohlenberg International for $850,000 on January 1, 2015. The estimated fair value of the NCI is $190,000. On the purchase date, Kohlenberg International has the following stockholders’ equ

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> You are working on a consolidated trial balance of a parent and an 80% owned subsidiary. What components will enter into the total noncontrolling interest, and how will it be displayed in the consolidated balance sheet?

2.99

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