Problem

Mighty Company purchased a 60 percent interest in Lowly Company on January 1, 2012, for $4...

Mighty Company purchased a 60 percent interest in Lowly Company on January 1, 2012, for $420,000 in cash. Lowly’s book value at that date was reported as $600,000 and the fair value of the noncontrolling interest was assessed at $280,000. Any excess acquisition-date fair value over Lowly’s book value is assigned to trademarks to be amortized over 20 years. Subsequently, on January 1, 2013, Lowly acquired a 20 percent interest in Mighty. The price of $240,000 was equivalent to 20 percent of Mighty’s book and fair value.

Neither company has paid dividends since these acquisitions occurred. On January 1,2013, Lowly’s book value was $800,000, a figure that rises to $840,000 (Common Stock of $300,000 and Retained Earnings of $540,000) by year-end. Mighty’s book value was $1.7 million at the beginning of 2013 and $1.8 million (Common Stock of $1 million and Retained Earnings of $800,000) at December 31, 2013. No intra-entity transactions have occurred and no additional stock has been sold. Each company applies the initial value method in accounting for the individual investments. What worksheet entries are required to consolidate these two companies for 2013? What is the noncontrolling interest in the subsidiary’s net income for this year?

Step-by-Step Solution

Request Professional Solution

Request Solution!

We need at least 10 more requests to produce the solution.

0 / 10 have requested this problem solution

The more requests, the faster the answer.

Request! (Login Required)


All students who have requested the solution will be notified once they are available.
Add your Solution
Textbook Solutions and Answers Search
Solutions For Problems in Chapter 7