Question

c. $419,500 d. $495,000 5.9 Majority-Owned Subsidiary with Differential Server Corporation is a majority-owned subsidiary of Proxy Corporation. Proxy acquired 75 percent ownership on January 1, 20X3, for $133,500. At that date, Server reported common stock out- standing of $60,000 and retained earnings of $90,000, and the fair value of the noncontrolling interest was $44,500. The differential is assigned to equipment, which had a fair value $28,000 more than book value and a remaining economic life of seven years at the date of the business combination. Server reported net income of $30,000 and paid dividends of $12,000 in 20X3.

Answer 1

In the books of Proxy Corporation

1/1/2013 Investment in server corporation a/c Dr 1,33,500

To Cash 1,33,500

(being cash invested)

1/1/2013 Investment in server corporation a/c Dr 22,500

(30,000*75/100)

To Cash a/c   22,500

(being cash invested according to net income)

1/1/2013 Cash a/c    Dr 9000

To Investment in server corporation a/c 9000

( being cash received)

1/1/2013 Investment in server corporation a/c Dr 3000

   To Investment income from server

corporation a/c 3000

( being cash recieved from income)