Problem

Sale of Shares by Subsidiary to NonaffiliateBrowne Corporation purchased 11,000 shares of...

Sale of Shares by Subsidiary to Nonaffiliate

Browne Corporation purchased 11,000 shares of Schroeder Corporation on January 1, 20X3, at book value. At that date, the fair value of the noncontrolling interest was equal to 26.7 percent of the book value of Schroeder Corporation. On December 31, 20X8, Schroeder reported these balance sheet amounts:

Cash

Accounts Receivable

Inventory

Buildings and Equipment

Less: Accumulated Depreciation

$ 80,000

120,000

200,000

600,000

(250,000)

Accounts Payable

Bonds Payable

Common Stock

Additional Paid-In Capital

Retained Earnings

$ 50,000

100,000

150,000

50,000

400,000

Total Assets

$750,000

Total Liabilities and Equities

$750,000

On January 1, 20X9, Schroeder issued an additional 5,000 shares of its $10 par value common stock to Nonaffiliated Company for $80 per share.

Required

a. Compute the change in book value of the shares held by Browne as a result of Schroeder’s issuance of additional shares.


b. Give the entry to be recorded on Browne’s books to recognize the change in book value of the shares it holds, assuming the change in book value is to be treated as an adjustment to additional paid-in capital.


c. Record the eliminating entry needed to prepare a consolidated balance sheet immediately after Schroeder’s issuance of additional shares.

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Solutions For Problems in Chapter 9