Negative Retained Earnings

Q1. Does a non-controlling shareholder have access to any information other than the consolidated financial statements to determine how well the subsidiary is doing? Explain.

Q2 Acquisition with Differential:

Road Corporation acquired all of Conger Corporation’s voting shares on January 1, 20X2, for $470,000. At that time Conger reported common stock outstanding of $80,000 and retained earnings of $130,000. The book values of Conger’s assets and liabilities approximated fair values, except for land, which had a book value of $80,000 and a fair value of $100,000, and buildings, which had a book value of $220,000 and a fair value of $400,000. Land and buildings are the only noncurrent assets that Conger holds.

Required   

1. Compute the amount of goodwill at the date of acquisition.
2. Give the eliminating entry or entries required immediately following the acquisition to prepare a consolidated balance sheet.
3. Pass Journal Entry under the following conditions where: “Parent No Longer Holds an Equity Interest” And “Parent Maintains an Equity Interest”
4. On December 31, 20X9, P Ltd Investments in Q Ltd account has a balance of $75,000. P Ltd’s 80% interest in Q Ltd has a fair value of $110,000. On January 1, 20X0, P Ltd sells all of its Q Ltd shares for $90,000. How should P Ltd account for this transaction?
5. And if P Ltd sells half (remaining 40%) of Q Ltd’s shares for $50,000. How should P Ltd account for this transaction?

Q4. Assume that a Parent Co. owns 100% of Sub Co. and had the following intercompany transactions during the year:

1. Parent loaned $500 to Sub there is no interest revenue or interest expense associated with this loan.
2. Parent made a sale to Sub for $400 cash. The inventory had originally cost Parent $220. Sub then sold that same inventory to an outsider for $500.
3. Parent made a sale to Sub for $300 cash. The inventory had originally cost Parent $180. Sub has not yet sold that same inventory to an outsider. (Don’t forget equity method entry!)

What consolidation worksheet entries would be made?

Q5. Explain the considerations to be made in the following conditions:

1. Negative retained earnings of subsidiary at acquisition
2. Subsidiary’s disposal of differential-related assets
3. Inventory-related differential
4. Fixed Assets-related differential