Sheet1
Solution
1 Balance of Investment account
Add: Net Income
624000
36000
660000
9000
651000
Less: Dividend
Balance in Investment account
2 Sale Price
Cost of Goods
Gross Margin Percentage
270000
180000
33.33%
Ending Inventory
Gross Profit
Ownership percentage
Unrealized intra-entity Gross Profit
Equity in Investee Company
Investment in Black and Decker
162000
54000
25.00%
13500
13500
3 Fair value
Purchase Price (20000*66)
Less: Book value of common stock
Allocation to specific account based on difference between
book value and Fair value
Land
Building
Inventory
Liabilities
Goodwill
5 Cost of net assets
Share of Best buy
-240000
120000
96000
84000
300000
60.00%
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Sheet1
Non Controlling Interest percentage
Amount assigned to NCI
40.00%
120000
6 Amount of Goodwill
Book Value of Net Assets
Share of Investor
600000
0.8
480000
540000
60000
Purchase price
Goodwill
7 Value assigned to the non controlling interest
= 500,000/.80*.20
125000
8
Journal Entry
as on December 31st 2011
12/31/11 Investment in Tyson Co.
Equity in Investee Company
107800
Cash
Investment in Tyson Co.
58800
Building
Copyright
Accumulated Depreciation
Amortization Expenses
Investment in Tyson Inc.
28000
80000
9 Equity in Investee Company
Investment in Nook Tablet Inc.
1280
Mark up for Nook Tablet Inc
Sales
Cost of goods sold
Gross Margin Percentage
500000
400000
20.00%
Inventory held by BN Com
Unrealised Profit
8000
1600
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Sheet1
Share of Investor
1280
10 Sale Price
Cost of Goods
Gross Margin Percentage
500000
420000
16.00%
Ending Inventory
Gross Profit
Ownership percentage
Unrealized intra-entity Gross Profit
Equity in Investee Company
Investment in Black and Decker
125000
20000
85.00%
17000
17000
11 Consolidated Net income for 2011
Net Income of Yamaha
Add: Equity in Investee Income
Less: Gain on Sale of Asset
Add: Depreciation Expense
Consolidated Net income for 2011
308000
126000
-70000
14000
378000
Working Notes
Cost of asset
Less: depreciation
Book Value
Sale of asset
Gain on sale of asset
140000
42000
98000
168000
70000
12 Non Controlling Interest is the portion of the subsidiary's stock which is not
owned by parent company. In other words the equity that does not directly or indirectly
belongs to parent entity.
Non Controlling Interest is the ownership of company which does not give shareholders a
right to control the company.
NCI are shown on the balance sheet under the equity shareholder account
In Income Statement, NCI share of income is shown separately.
13 Inter Entity Transaction
Transaction which occurred between parent and its subsidiary are called inter company transaction.
For example inventory sold by parent to subsidiary or by subsidiary to parent. If inventory is sold at pr
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unrealized gain is recognized by passing the following journal entry
Equity in Investee Income
Investment in Subsidiary.
First of all profit margin is calculated
Secondly profit margin in inventory is calculated
Lastly unrealized gains calculated by multiplying the percentage of share held.
For assets that are not fully depreciated
Unrealized gain on sale of asset is recognized, such gain is deducted from the consolidated income stat
charged on the appreciated value is also added back to the consolidated net income
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Sheet1
13500
1320000
1176000
144000
60000
84000
Page 5
Sheet1
107800
58800
2800
4000
1280
Page 6
Sheet1
17000
ck which is not
s not directly or indirectly
does not give shareholders a
lder account
y are called inter company transaction.
sidiary to parent. If inventory is sold at profit.
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Sheet1
age of share held.
educted from the consolidated income statement. Depreciation
nsolidated net income
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