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2011 Calculations
Defer the unrealized gain, with full effect to Pak Pak's Income from San 90%(70) 10 = $53 Noncontrolling interest share 10%(70) = $7 Elimination entry for 2009 Worksheet Gain on sale of land (-Ga, -SE) Land (-A) 10 10
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10
10
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2015 Calculations
Recognize the previously deferred gain, with full effect to Pak Pak's Income from San 90%(90) + 10 = $91 Noncontrolling interest share 10%(90) = $9 Elimination entry for 2015 Worksheet
10 10
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Downstream Example
Per owns 80% of Sop, acquired at cost equal to fair value. On 1/1/2011, Per sells machinery to Sop at a $30 profit. The machinery has a remaining life of 5 years from 1/1/2011. Sop disposes of the machinery at book value at the end of 5 years. Sop's income is $70 in 2011, $80 per year for 2012 to 2014, and $90 in 2015.
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2011 Calculations
Defer the unrealized gain and amortize it over 5 years with full effect to Per 30 gain / 5 years = $6 Per's Income from Sop 80%(70) 30 + 6 = $32 Noncontrolling interest share 20%(70) = $14 Elimination entry for 2011 Worksheet
Gain on sale of machinery (-Ga, -SE) Machinery (-A) Accumulated depreciation (+A) Depreciation expense (-E, +SE) 30
30
6 6
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Entries (cont.)
Worksheet entries for 2013
Investment in Sop (+A) Accumulated depreciation (+A) Machinery (-A) Accumulated depreciation (+A) Depreciation expense (-E, +SE) 18 12 30 6 6
12 18 30
6 6
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2015 Calculations
Recognize the remaining deferred gain, with full effect to Per Per's Income from Sop 80%(90) + 6 = $78 Noncontrolling interest share 20%(90) = $18 Elimination entries for 2015 Worksheet Investment in Sop (+A) 6 Accumulated depreciation (+A) 24 Machinery (-A) 30 Accumulated depreciation (+A) 6 Depreciation expense (-E, +SE) 6
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall 6-18
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Upstream Example
Pail owns 70% of Shovel, acquired at cost equal to fair value. On 1/1/2011, Shovel sells machinery to Pail at a $40 profit. The machinery has a remaining life of 5 years from 1/1/2011. Pail uses the machinery for four years, then sells it at a profit at the start of 2015. Shovel's income is $70 in 2011, $80 per year for 2012 to 2014, and $90 in 2015.
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2011 Calculations
Defer the unrealized gain and amortize it over 5 years sharing the gain 40 gain / 5 years = $8 Pail's Income from Shovel 70%(70 40 + 8) = $26.6 Noncontrolling interest share 30%(70 40 + 8) = $11.4 Elimination entry for 2011 Worksheet Gain on sale of machinery (-Ga, -SE) 40 Machinery (-A) 40 Accumulated depreciation (+A) 8 Depreciation expense (-E, +SE) 8
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall 6-22
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Investment in Shovel (+A) Noncontrolling interest (-SE) Accumulated depreciation (+A) Machinery (-A) Accumulated depreciation (+A) Depreciation expense (-E, +SE)
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Investment in Shovel (+A) Noncontrolling interests (-SE) Accumulated depreciation (+A) Machinery (-A) Accumulated depreciation (+A) Depreciation expense (-E, +SE)
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Investment in Shovel (+A) Noncontrolling interest (-SE) Accumulated depreciation (+A) Machinery (-A) Accumulated depreciation (+A) Depreciation expense (-E, +SE)
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2015 Calculations
Recognize the remaining deferred gain, sharing the impact with controlling and noncontrolling interests Unamortized gain = 1 year at $8 Pail's Income from Shovel 70%(90 + 8) = $68.6 Noncontrolling interest share 30%(90 + 8) = $29.4 Elimination entries for 2015 Worksheet Investment in Shovel (+A) 5.6 Noncontrolling interests (-SE) 2.4 Accumulated depreciation (+A) 32.0 Machinery (-A) 40.0 Accumulated depreciation (+A) 8.0 Gain on sale of machinery (Ga, +SE) 8.0
Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall 6-27
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