Jawaban chapter 9 adaptasi

CHAPTER 9

CONSOLIDATION OWNERSHIP ISSUES

ANSWERS TO QUESTIONS

Q9-1 Preferred stock of the subsidiary is eliminated in the consolidation process in a mannercomparable to that used in eliminating the common stock of the subsidiary. For thosepreferred shares held by the parent company, a proportionate share of subsidiary income andnet assets assigned to the preferred shares is eliminated against the balance in the parent'sinvestment account. Subsidiary income and net assets assigned to preferred shares not heldby the parent are included as a part of the noncontrolling interest along with the balancesassigned to noncontrolling interest for common stock not held by the parent. The claim of thepreferred shareholders normally is computed before the common stock is eliminated so thatany priority claim associated with the preferred stock can be properly recognized andassigned to the correct shareholder group.

Q9-2 All preferred shares held by the parent are eliminated against the balance in theinvestment account. Those held by unrelated parties are included in the total assigned to thenoncontrolling interest.

Q9-3 Preferred dividends normally are deducted in arriving at income available to commonshareholders. When preferred dividends are paid by the subsidiary to shareholders other thanthe parent, the income accruing to the common shares held by the parent company isreduced. Therefore, they must be deducted to arrive at income available to the parentcompany shareholders. No preferred dividends are deducted if the parent company owns allthe shares or if no dividends are declared and the preferred stock is noncumulative.

Q9-4 In the event the preferred shares are redeemed, the subsidiary must pay the callpremium and the net assets of the subsidiary will be reduced by the amount of the premium.Because it is more conservative to assume the call premium will be paid, the amount of thepremium normally is added to the claim of the preferred shareholders and deducted from theequity assigned to the common shareholders whenever consolidated statements areprepared.

Q9-5 The fair value of the net assets of the subsidiary is computed by deducting the fairvalue of the subsidiary's liabilities from the fair value of its assets. When the subsidiary haspreferred stock outstanding, the claims of the preferred shareholders, including dividends inarrears and participation rights held by preferred shareholders, must be taken intoconsideration in determining the fair value of net assets available to common shareholders.These items, when deducted from the fair value of the identifiable assets of the acquiredcompany, will reduce the amount of net assets assigned to common stock. In those caseswhere the purchase price of the common stock is not reduced proportionately, the amountassigned to goodwill will increase when the common stock is eliminated.

Solutions Manual – Baker / Lembke / King / Jeffrey, Advanced Financial Accounting, 7e

9- 1

Chapter 9

Q9-6 Under normal circumstances the parent will record a gain or loss on the differencebetween the carrying value of the shares sold and the sale price. For consolidation purposesthe most appropriate treatment is to consider the point of sale to a nonaffiliate as the date ofissue of the subsidiary shares. Any gain or loss recorded by the parent should be eliminated inthe consolidation process and treated as a part of additional paid-in capital of the consolidatedentity.

Q9-7 All common shareholders should share equally in the net assets of a company. When asubsidiary sells additional shares to a nonaffiliate at a price in excess of existing book value,the effect will be to increase the net book value of all shareholders. Because it is a capitaltransaction, no gain or loss is recognized on the sale.

Q9-8 Each purchase of additional shares should be examined to determine the differencebetween the price paid and underlying book value. When Rp10 over book value is paid for theshares, the parent will need to allocate that amount to either identifiable net assets or goodwillat the time the investment balance is eliminated and consolidated statements are prepared.

Q9-9 All the shares of the subsidiary are eliminated in preparing the consolidatedstatements. Thus, treasury shares reported by the subsidiary are eliminated in theconsolidation workpaper. The effect of the retirement on the consolidated statements dependson the price paid and whether the shares were purchased from the parent or from anonaffiliate.

Q9-10 Indirect ownership is a general term used whenever one company owns shares ofanother company and that company holds ownership in a third company. Indirect controloccurs when a majority of the shares of a particular company are held by one or morecompanies that are, in turn, under the control of another company. By exercising its controlover those companies the parent can exercise control of the company indirectly owned.

Q9-11 A reciprocal relationship exists if Subsidiary A and Subsidiary B hold ownership ineach other. If Subsidiary A records investment income based on the reported net income ofSubsidiary B and Subsidiary B records investment income based on the reported net incomeof Subsidiary A, the sum of the reported net income totals for the two companies may besubstantially greater than the sum of the reported operating income totals for the twocompanies. Parent company net income will be overstated if the impact of the reciprocalrelationship is ignored when the parent company records investment income on its ownershipin the two subsidiaries.

Q9-12 Under the treasury stock method the parent company shares that have beenpurchased by a subsidiary are reported as treasury stock in the consolidated balance sheet.The carrying value of the shares is the amount paid by the subsidiary when they werepurchased.

Q9-13 The entity method focuses on the reciprocal nature of the ownership between the twocompanies. Income attributed to each company is computed by solving a set of simultaneousequations. Consolidated net income is then computed by multiplying the income computed forthe parent by the percentage of ownership held by nonaffiliates. The treasury stock method ismore simply applied, computing consolidated net income by deducting income assigned tononcontrolling shareholders from the combined operating incomes of the two companies inthe normal manner. However, in this case, income assigned to the noncontrollingshareholders is based on the operating income of the subsidiary plus dividends received fromthe parent.


9-2

Chapter 9

Q9-14 Consolidated net income will be reduced by Rp72,000 (Rp100,000 x .90 x .80) whenthe unrealized profit of Tiny Corporation is eliminated. A total of Rp10,000 is treated as areduction to the income assigned to noncontrolling shareholders of Tiny Corporation(Rp100,000 x .10) and Rp18,000 is a reduction of the income assigned to noncontrollingshareholders of Subsidiary Company (Rp100,000 x .90 x .20).

Q9-15 All three companies should be included in the consolidated financial statements. SlideCompany should be consolidated with Bit Company because Bit holds majority ownership ofSlide. Bit Company, in turn, should be consolidated with Snapper Corporation becauseSnapper holds majority ownership of Bit.


9-3

Chapter 9

SOLUTIONS TO CASES

C9-1 Effect of Subsidiary Preferred Stock

When a parent company owns all the outstanding preferred and common shares of itssubsidiary, the contribution of the subsidiary to consolidated net income can be calculated onthe basis of the reported net income of the subsidiary. In most cases the parent does not ownall the shares of the subsidiary and income assigned to the noncontrolling interest includes (1)a portion of subsidiary preferred dividends and (2) a portion of earnings available to commonshareholders.

To determine the amount of income to assign to preferred and common shareholders of thesubsidiary, the controller needs to have the following information about the preferred stock:

1. The number of preferred shares outstanding and the number owned by the parent andother affiliates.

2. The annual preferred dividend rate per share and whether the dividends are cumulative ornoncumulative.

3. If the dividends are noncumulative, the amount of preferred dividends declared during theperiod, if any.

In this particular case the parent does not appear to own any of the subsidiary's preferredshares. Once the controller determines the portion of subsidiary income assignable tocommon shareholders, consolidated net income is computed by adding the parent's pro ratashare of this amount to the parent's income from its own operations.


9-4

Chapter 9

C9-2 Presentation of Noncontrolling Interest

MEMO

To: TreasurerPT Digdaya

From: , Accounting Staff

Re: PT Digdaya’s Income on its Investment in PT Buana

The consolidated financial statements prepared by PT Digdaya should include PT Buana.The purpose of consolidated financial statements is to present the financial position andresults of operations for a parent and one or more subsidiaries as if the individual entitiesactually were a single company or entity. [ARB 51, Par 1]

Consolidated income reported by PT Digdaya should include its share of the net income of PTBuana. However, the portion of PT Buana’s net income assignable to its noncontrollingshareholders should not be included in Deep’s reported net income. The correct amount ofincome to be reported by Deep in 20X4 from its investment in PT Buana is computed asfollows:

Common PreferredPT Buana’s reported net income Rp200,000,000Dividends to preferred shareholders (120,000,000) Rp120,000,000Income to common shareholders Rp 80,000,000Deep’s ownership percentage .60 .10Income to Deep Rp 48,000,000 Rp 12,000,000

While the company correctly reported dividend income of Rp12,000,000 from its investment inPT Buana’s preferred stock, it should have reported only Rp48,000,000 (Rp80,000,000 x .60)of income on its investment in PT Buana’s common stock instead of Rp120,000,000(Rp200,000,000 x .60). This error has resulted in an overstatement of Deep’s net income andits investment in PT Buana in the amount of Rp72,000,000 (Rp120,000,000 - Rp48,000,000).The appropriate corrections should be recorded by PT Digdaya and its financial statementrevised, if already issued.

If consolidated financial statements have already been issued and income of Rp140,000,000[(Rp80,000,000 x .40) + (Rp120,000,000 x .90)] was not assigned to the noncontrollingshareholders, the income statement should be corrected and a corresponding adjustmentmade to the amount reported as noncontrolling interest in the consolidated balance sheet.

Primary citation:ARB 51


9-5

Chapter 9

C9-3 Sale of Subsidiary Shares

MEMO

To: Robert ReaderVice President of FinancePT Barito

From: , CPA

Re: Recognition of Gain on Sale of Subsidiary Shares

Existing accounting standards do not specifically address the issue of recognizing a gain orloss on the sale of subsidiary shares when the parent retains controlling ownership. APB 18deals explicitly with sales of stock of an investee, requiring recognition of a gain or loss on thedifference between the selling price and carrying amount of the stock sold. [APB 18, Par.19(f)]

Equity-method reporting is intended to apply to those situations in which consolidation is notconsidered appropriate for financial reporting purposes. When the parent sells shares of thesubsidiary but continues to hold controlling interest the issue of whether the gain or loss onthe sale of shares should be carried to the consolidated income statement or eliminated inconsolidation arises. The FASB suggested that no gain or loss be recognized. [FASBEXPOSURE DRAFT, “Consolidated Financial Statements, Including Accounting andReporting of Noncontrolling Interests in Subsidiaries; a replacement of ARB No. 51,”June 30, 2005, par. 23]

In those situations where control is retained, it is proposed that the difference between thecarrying value on the parent’s PT Baritos before the sale and the sale price be recognizeddirectly in equity (paid-in-capital).

In current practice it is not uncommon for companies to report a gain when shares of asubsidiary are sold at more than carrying value and PT Barito would not appear to be inviolation of current accounting procedures if it reports a gain of Rp48,000 in 20X1. However,the preferred method would be to report the Rp48,000 as additional paid-in capital.

Primary citations:APB 18, Par. 19(f)FASB EXPOSURE DRAFT: CONSOLIDATED FINANCIAL STATEMENTSFASB PROJECT ON LIABILITIES AND EQUITIES


9-6

Chapter 9

C9-4 Sale of Subsidiary Shares

A gain of Rp60 per share will be recorded by PT Himalaya on the sale to PT Bona regardlessof whether the purchaser is an affiliate or a nonaffiliate. In both cases the gain must beeliminated in preparing the consolidated statements.

(a) On a sale of shares to a nonaffiliate, net resources have been brought into theconsolidated entity and there is an additional claim by the noncontrolling shareholders. It isconsidered appropriate to treat the gain recorded by the parent as an addition to consolidatedadditional paid-in capital in such cases. A sale of subsidiary shares to a nonaffiliate will alsochange the amount of income assigned to the noncontrolling interest in the consolidatedincome statement and the amount of net assets assigned to noncontrolling interest in theconsolidated balance sheet.

(b) When a parent sells shares of one subsidiary to another subsidiary there is no increasein net resources to the consolidated entity, and the gain recorded by the parent must beeliminated when the investment balance reported by the subsidiary is eliminated. A change inthe claim of the noncontrolling interest is likely to occur if the subsidiary that purchases theshares is not wholly-owned. As a result, there may be some change in consolidated incomeand the balance sheet totals assigned to noncontrolling interest.


9-7

Chapter 9

C9-5 Reciprocal Ownership

A great many factors beyond the immediate impact on reported earnings may be important indeciding on the use of the funds. Items such as the following should be considered:

1. Are the excess funds held by PT Tritani available only temporarily or not likely to beneeded in the foreseeable future?

2. Will there be any regulatory or taxation problems associated with one or more of thealternatives?

3. Can shares of the companies be purchased in the desired quantities and at existing marketprices or are there potential difficulties associated with one or more alternatives?

4. Is it desirable to acquire more shares of either subsidiary since controlling ownershipalready is in the hands of Strong Manufacturing?

5. Have the noncontrolling shareholders of either subsidiary been troublesome or caused theparent to refrain from actions that it might otherwise have taken?

With the information given, it is difficult to determine which action will have the most favorableimpact on consolidated net income. The earnings of each company, the number of sharesoutstanding, and the relative market prices of the shares each will have an effect. In general,reported income is maximized by purchasing the shares with the lowest price-earnings ratio.


9-8

Chapter 9

SOLUTIONS TO EXERCISES

E9-1 Multiple-Choice Questions on Preferred Stock Ownership

1. d .20(Rp40,000,000 + Rp60,000,000) + 1.00(Rp30,000,000) = Rp50,000,000

2. c .20(Rp40,000,000 + Rp60,000,000) + .30(Rp30,000,000) = Rp29,000,000

3. b Only the retained earnings of the acquiring company is included.

4. a The portion held by the parent is eliminated when the preferred investment iseliminated, and the portion held by nonaffiliates is eliminated and included with thebalance reported as noncontrolling interest in the consolidated balance sheet.

E9-2 Multiple-Choice Questions on Multilevel Ownership

1. b Rp100,000,000 + .80[Rp80,000,000 + .60(Rp50,000,000)] = Rp188,000,000

2. b .40(Rp50,000,000) = Rp20,000,000

3. c .20[Rp80,000,000 + .60(Rp50,000,000)] = Rp22,000,000

4. c .40(Rp50,000,000) + .20[Rp80,000,000 + .60(Rp50,000,000)] = Rp42,000,000

5. c .80[(Rp160,000,000 - Rp120,000,000) / 10 years] = Rp3,200,000

E9-3 Acquisition of Preferred Shares

Eliminating entries:

E(1) Common Stock — PT Sakura 50,000,000Retained Earnings 150,000,000

Investment in PT Sakura CommonStock 140,000,000

Noncontrolling Interest 60,000,000Eliminate investment in common stock.

E(2) Preferred Stock — PT Sakura 100,000,000Investment in PT Sakura

Preferred Stock 60,000,000Noncontrolling Interest 40,000,000

Eliminate subsidiary preferred stock.


9-9

Chapter 9

E9-4 Subsidiary with Preferred Stock Outstanding

Eliminating entries:

E(1) Common Stock — PT Tulip 150,000,000Retained Earnings 210,000,000

Investment in PT Tulip Common Stock 270,000,000Noncontrolling Interest 90,000,000

Eliminate investment in common stock.

E(2) Preferred Stock — PT Tulip 200,000,000Investment in PT Tulip Preferred Stock 80,000,000Noncontrolling Interest 120,000,000


E9-5 Subsidiary with Preferred Stock Outstanding

a. Entries recorded by Clayton Corporation:

(1) Investment in PT Tulip Common Stock 270,000,000Investment in PT Tulip Preferred Stock 80,000,000

Cash 350,000,000Record purchase of PT Tulip stock.

(2) Cash 25,500,000Investment in PT Tulip Common Stock 25,500,000

Record dividends from PT Tulip:Rp25,500,000 = (Rp50,000,000 - Rp16,000,000) x .75

(3) Cash 6,400,000Dividend Income 6,400,000

Record dividends on preferred stockfrom PT Tulip: Rp16,000,000 x .40

(4) Investment in PT Tulip Common Stock 40,500,000Income from Subsidiary 40,500,000

Record equity-method income:Rp40,500,000 = (Rp70,000,000 - Rp16,000,000) x .75


9 - 10

Chapter 9

E9-5 (continued)

b. Eliminating entries:

E(1) Income from Subsidiary 40,500,000Dividends Declared — Common Stock 25,500,000Investment in PT Tulip Common Stock 15,000,000

Eliminate income from subsidiary.

E(2) Dividend Income — Preferred 6,400,000Dividends Declared — Preferred 6,400,000

Eliminate dividend income fromsubsidiary preferred.

E(3) Income to Noncontrolling Interest 23,100,000Dividends Declared — Preferred Stock 9,600,000Dividends Declared — Common Stock 8,500,000Noncontrolling Interest 5,000,000

Assign income to noncontrolling interest:Rp23,100,000 = [(Rp70,000,000 - Rp16,000,000) x .25] +

(Rp16,000,000 x .60)Rp9,600,000 = Rp16,000,000 x .60Rp8,500,000 = (Rp50,000,000 - Rp16,000,000) x .25Rp5,000,000 = Rp13,500,000 - Rp8,500,000

E(4) Common Stock — PT Tulip 150,000,000Retained Earnings, January 1 210,000,000

Investment in PT Tulip Common Stock 270,000,000Noncontrolling Interest 90,000,000

Eliminate beginning investment balance.

E(5) Preferred Stock — PT Tulip 200,000,000Investment in PT Tulip Preferred Stock 80,000,000Noncontrolling Interest 120,000,000



9 - 11

Chapter 9

E9-6 Preferred Dividends and Call Premium

a. PT Cempaka's contribution to 20X2 consolidated net income:

Reported net income for 20X2 Rp70,000,000

Income assigned to noncontrolling interest:

Preferred shares [.40(Rp100,000,000 x .12)] Rp4,800,000

Common shares {.10[Rp70,000,000 - 5,800,000 (10,600,000)

(Rp100,000,000 x .12)]}

Contribution to consolidated net income Rp59,400,000

b. Income assigned to the noncontrolling interest in 20X2, as computed in part (a), isRp10,600,000.

c. Retained earnings assignable to preferred shareholders:

Dividends in arrears [5 years x (Rp100,000,000 x Rp60,000,000

.12)]

Call feature (Rp2 x 10,000,000 shares) 20,000,000

Total retained earnings assigned to preferred Rp80,000,000

stock

d. Book value of common shares:

Par value of common shares outstanding Rp300,000,000

Retained earnings balance Rp380,000,000

Less: Balance assigned to preferred shares (80,000,000) 300,000,000

Book value of common shares Rp600,000,000

e. Total noncontrolling interest:

Preferred stock [.40(Rp100,000,000 + Rp 72,000,000

Rp80,000,000)]

Common stock (.10 x Rp600,000,000) 60,000,000

Total noncontrolling interest Rp132,000,000


9 - 12

Chapter 9

E9-7 Multilevel Ownership

a. Consolidated net income for 20X6 is Rp153,200:

Operating income of PT Garuda Rp 90,000,000Equity-method income from:

Dally (Rp40,000,000 x .25) 10,000,000Latent [(Rp60,000,000 + Rp16,000,000) x .70] 53,200,000

Consolidated net income Rp153,200,000

b. Income of Rp36,800,000 is assigned to noncontrollinginterest:

Income from Dally (Rp40,000,000 x .35) Rp14,000,000,000Income from Latent [(Rp60,000,000 + Rp16,000,000) x .30] 22,800,000Total income assigned Rp36,800

c. Only the Rp45,000,000 of dividends paid by PT Garuda to its shareholders will bereported as dividends declared in PT Garuda's 20X6 consolidated retained earningsstatement.


9 - 13

Chapter 9

E9-8 Eliminating entries for Multilevel Ownership

a. Journal entries recorded by PT Buana on its investment in PT Tarumanegara:

(1) Investment in PT Tarumanegara Stock 120,000,000Cash 120,000,000

Record purchase of PT Tarumanegarastock.

(2) Cash 9,000,000Investment in PT Tarumanegara Stock 9,000,000

Record dividends from PT Tarumanegara:Rp15,000,000 x .60

(3) Investment in PT Tarumanegara Stock 24,000,000Income from PT Tarumanegara 24,000,000

Record equity-method income:Rp40,000,000 x .60

b. Journal entries recorded by PT Pandawa on its investment in PT Buana:

(1) Investment in PT Buana Stock 315,000,000Cash 315,000,000

Record purchase of PT Buanastock.

(2) Cash 45,000,000Investment in PT Buana Stock 45,000,000

Record dividends from PT Buana:Rp50,000,000 x .90

(3) Investment in PT Buana Stock 129,600,000Income from PT Buana 129,600,000

Record equity-method income:(Rp120,000,000 + Rp24,000,000) x .90

c. Eliminating entries:

E(1) Income from PT Tarumanegara 24,000,000Dividends Declared 9,000,000Investment in PT Tarumanegara Stock 15,000,000

Eliminate income from PT Tarumanegara.

E(2) Income to Noncontrolling Interest 16,000,000Dividends Declared 6,000,000Noncontrolling Interest 10,000,000

Assign income to noncontrolling interest:Rp16,000,000 = Rp40,000,000 x .40Rp6,000,000 = Rp15,000,000 x .40


9 - 14

Chapter 9

E9-9 (continued)

E(3) Common Stock — PT Tarumanegara 100,000,000Additional Paid-In Capital 60,000,000Retained Earnings, January 1 40,000,000

Investment in PT Tarumanegara Stock 120,000,000Noncontrolling Interest 80,000,000

Eliminate investment in PT Tarumanegarastock:Rp120,000,000 = Rp200,000,000 x .60Rp80,000,000 = Rp200,000,000 x .40

E(4) Income from PT Buana 129,600,000Dividends Declared 45,000,000Investment in PT Buana Stock 84,600,000

Eliminate income from PT Buana.


Assign income to noncontrollingshareholders of PT Buana:Rp14,400,000 = (Rp120,000,000 + Rp24,000,000) x .10Rp5,000,000 = Rp50,000,000 x .10Rp9,400,000 = Rp14,400,000 - Rp5,000,000

E(6) Common Stock — PT Buana 150,000,000Additional Paid-In Capital 60,000,000Retained Earnings, January 1 140,000,000

Investment in PT Buana Stock 315,000,000Noncontrolling Interest 35,000,000

Eliminate investment in PT BuanaCorporation stock:Rp315,000,000 = Rp350,000,000 x .90Rp35,000,000 = Rp350,000,000 x .10


9 - 15

Chapter 9

E9-9 Subsidiary Stock Dividend

a. PT Lazuardi:Stock Dividends Declared 40,000,000

Common Stock 40,000,000

PT Laksmi: No entry required.

b. Eliminating entries, December 31, 20X3:

E(1) Income from Subsidiary 17,500,000Dividends Declared 7,000,000Investment in PT Lazuardi Stock 10,500,000


E(3) Common Stock — PT Lazuardi 140,000,000Retained Earnings, January 1 200,000,000

Investment in PT Lazuardi Stock 210,000,000Noncontrolling Interest 90,000,000Stock Dividends Declared 40,000,000

c. Eliminating entry, January 1, 20X4:

E(1) Common Stock — PT Lazuardi 140,000,000Retained Earnings 175,000,000

Investment in PT Lazuardi Stock 220,500,000Noncontrolling Interest 94,500,000

PT Lazuardi retained earnings, December 31, 20X3:

Balance, December 31, 20X2 Rp200,000,000Add: Net income for 20X3 25,000,000Less: Stock dividend in 20X3 (40,000,000)

Cash dividend paid in 20X3 (10,000,000)Balance, December 31, 20X3 Rp175,000,000


9 - 16

Chapter 9

E9-10 Sale of Subsidiary Shares by Parent

a. Investment in PT Arjuna, January 1, 20X3:

Purchase price Rp360,000,000

PT Arjuna net income in 20X3 and 20X4 Rp100,000,000

Dividends paid by PT Arjuna in 20X3 and 20X4 (40,000,000)

Rp 60,000,000

Proportion of stock held by PT Sumo x .80 48,000,000

Balance prior to sale of shares Rp408,000,000

b. Journal entry recorded by PT Sumos for sale of shares:

Cash 120,000,000

Investment in PT Arjuna Stock 102,000,000

Gain on Sale of PT Arjuna Stock 18,000,000

Rp102,000,000 = Rp408,000,000 x 4,000 /[(Rp200,000,000 / Rp10,000) x .80]


E(1) Income from Subsidiary 30,000,000

Dividends Declared 12,000,000


E(2) Income to Noncontrolling Interest 20,000,000


Noncontrolling Interest 12,000,000

E(3) Common Stock — PT Arjuna 200,000,000

Retained Earnings, January 1 310,000,000


Noncontrolling interest 204,000,000

E(4) Gain on sale of PT Arjuna Stock 18,000,000

Additional Paid-In Capital 18,000,000

E9-11 Purchase of Additional Shares from Nonaffiliate

a. Purchase price, December 31, 20X7 Rp240,000,000

PT Melati net income for 20X8

(Rp230,000,000 + Rp20,000,000 - Rp50,000,000

Rp200,000,000)

Proportion of stock held by PT Widuri x .60

Rp30,000,000

Amortization of differential (Rp30,000,000 / 10 (3,000,000)

years)

Income from subsidiary 27,000,000

Dividends received from PT Melati

(Rp20,000,000 x .60) (12,000,000)

Balance in investment account, December 31, Rp255,000,000


9 - 17

Chapter 9

20X8


9 - 18

Chapter 9

E9-11 (continued)

b. Balance in investment account, December 31, 20X8 Rp255,000,000

Purchase of additional shares on January 1, 20X9 96,000,000

PT Melati net income for 20X9

(Rp280,000,000 + Rp20,000,000 - Rp230,000,000) Rp70,000,000

Proportion of stock held by PT Widuri x .80

Rp56,000,000

Less: Amortization of differential on stock

purchased:

December 31, 20X7 (Rp30,000,000 / 10 years) (3,000,000)

January 1, 20X9 (Rp20,000,000 / 10 years) (2,000,000)

Income from subsidiary 51,000,000

Dividends received from PT Melati

Company (Rp20,000,000 x .80) (16,000,000)

Balance in investment account, December 31, 20X9 Rp386,000,000


E(1) Income from PT Melati 51,000,000


Investment in PT Melati

Stock 35,000,000




Rp14,000,000 = Rp70,000,000 x .20

E(3) Common Stock — PT Melati 150,000,000


Differential 47,000,000

Investment in PT Melati

Company Stock 351,000,000


Rp30,000,00 Differential on shares purchased,

0

December 31, 20X7

(3,000,00) Amortized in 20X8

Rp27,000,00 Unamortized balance

0

Differential on shares purchased,

20,000,000 January 1, 20X9

Unamortized purchase differential,

Rp47,000,00 January 1, 20X9

0

E(4) Patents 42,000,000

Amortization Expense 5,000,000

Differential 47,000,000

Rp42,000,000 = (Rp47,000,000 - Rp3,000,000 - Rp2,000,000)


9 - 19

Chapter 9

E9-12 Repurchase of Shares by Subsidiary from Nonaffiliate

a. Book value of PT Krisna stock outstanding Rp500,000,000Cost of treasury shares repurchased (84,000,000)Book value of remaining shares outstanding Rp416,000,000Proportion of remaining shares held by PT Brahmana

(6,000 / 8,000) x .75Adjusted book value of shares held by PT Brahmana Rp312,000,000Book value of shares held by PT Brahmana before treasury

stock repurchase by PT Krisna (Rp500,000,000 x .60) (300,000,000)Increase in carrying value of shares held by PT Brahmana Rp 12,000,000

b. Investment in PT Krisna Manufacturing Stock 12,000,000Additional Paid-In Capital 12,000,000

c. Common Stock — PT Krisna Manufacturing 100,000,000Additional Paid-In Capital 150,000,000Retained Earnings, January 1 250,000,000

Investment in PT Krisna Stock 312,000,000Noncontrolling Interest 104,000,000Treasury Shares 84,000,000

Rp312,000,000 = .75(Rp500,000,000 - Rp84,000,000)Rp104,000,000 = .25(Rp500,000,000 - Rp84,000,000)


9 - 20

Chapter 9

E9-13 Sale of Shares by Subsidiary to Nonaffiliate

a. Computation of change in book value of PT Sadewa shares held by PT Bhakti Yuda:

Before AfterSale Sale

Common stock, Rp10,000 par value Rp150,000,000 Rp 200,000,000Additional paid-in capital 50,000,000 400,000,000Retained earnings 400,000,000 400,000,000Total stockholders' equity of PT Sadewa Rp600,000,000 Rp1,000,000,000Proportion of stock held by PT Bhakti Yuda

Corporation:11,000 / 15,000 x .73311,000 / (15,000 + 5,000) x .550

Book value of shares Rp440,000,000 Rp 550,000,000

Increase in book value of shares held byPT Bhakti Yuda Rp 110,000,000

b. Investment in PT Sadewa Stock 110,000,000Additional Paid-In Capital 110,000,000

c. Common Stock — PT Sadewa 200,000,000Additional Paid-In Capital 400,000,000Retained Earnings 400,000,000

Investment in PT Sadewa Stock 550,000,000Noncontrolling Interest 450,000,000

Rp450,000,000 = Rp1,000,000,000 x .45


9 - 21

Chapter 9

SOLUTIONS TO PROBLEMS

P9-14 Multiple-Choice Questions on Preferred Stock Ownership

1. d Book value of shares held by noncontrolling interest:Preferred stock (Rp100,000,000 x .30) Rp30,000,000Common stock [(Rp200,000,000 + Rp50,000,000) x .20] 50,000,000Total book value Rp80,000,000

2. b Income to noncontrolling preferredshareholders

[(Rp100,000,000 x .10) x .30] Rp3,000,000Income to noncontrolling commonshareholders:

Reported net income of PT Udayana Rp30,000,000Income to preferred shareholders (10,000,000)Income to common shareholders Rp20,000,000Proportion of common stock owned by

noncontrolling interest x .20 4,000,000Total income to noncontrolling interest Rp7,000,000

3. b Reported net income of PT Udayana Rp 30,000,000Operating income of PT Srikandi 100,000,000

Rp130,000,000Less: Income to noncontrolling interest (7,000,000)Consolidated net income Rp123,000,000

4. a Parent company balance at date of acquisition.

5. a All preferred shares of the subsidiary are eliminated in preparing the consolidatedfinancial statements.


9 - 22

Chapter 9

P9-15 Multilevel Ownership with Purchase Differential

a. Journal entries recorded by PT Cahaya on its investment in PT Bina Jaya:

(1) Investment in PT Bina Jaya Stock 405,000,000Cash 405,000,000

Record purchase of PT Bina Jaya stock.

(2) Cash 14,000,000Investment in PT Bina Jaya Stock 14,000,000

Record dividends from PT Bina Jaya:Rp20,000,000 x .70

(3) Investment in PT Bina Jaya Stock 21,000,000Income from PT Bina Jaya 21,000,000

Record equity-method income:Rp30,000,000 x .70

(4) Income from PT Bina Jaya 2,000,000Investment in PT Bina Jaya Stock 2,000,000

Amortize differential related tobuildings and equipment:Rp20,000,000 / 10 years

b. Journal entries recorded by PT Permata on its investment in PT Cahaya:

(1) Cash 20,000,000Investment in PT Cahaya Stock 20,000,000

Record dividends from PT Cahaya:Rp25,000,000 x .80

(2) Investment in PT Cahaya Stock 63,200,000Income from PT Cahaya 63,200,000

Record equity-method income:(Rp60,000,000 + Rp19,000,000) x .80

(3) Income from PT Cahaya 8,000,000Investment in PT Cahaya Stock 8,000,000

Amortize differential related totrademark: Rp40,000,000 / 5 years


9 - 23

Chapter 9

P9-15 (continued)


E(1) Income from PT Bina Jaya 19,000Dividends Declared 14,000Investment in PT Bina Jaya Stock 5,000

Eliminate income from PT Bina Jaya.

E(2) Income to Noncontrolling Interest 9,000Dividends Declared 6,000Noncontrolling Interest 3,000

Assign income to noncontrollingshareholders of PT Bina Jaya:Rp9,000 = Rp30,000 x .30Rp6,000 = Rp20,000 x .30Rp3,000 = Rp9,000 - Rp6,000

E(3) Common Stock — PT Bina Jaya 250,000Retained Earnings, January 1 300,000Differential 20,000

Investment in PT Bina Jaya Stock 405,000Noncontrolling Interest 165,000

Eliminate investment in PT Bina Jayastock:Rp20,000 = Rp405,000 - (Rp550,000 x .70)Rp405,000 = Purchase priceRp165,000 = Rp550,000 x .30

E(4) Buildings and Equipment 20,000Differential 20,000

Assign beginning differential.

E(5) Depreciation Expense 2,000Accumulated Depreciation 2,000

Amortize differential related tobuildings and equipment:Rp20,000 / 10 years

E(6) Income from PT Cahaya 55,200Dividends Declared 20,000Investment in PT Cahaya Stock 35,200

Eliminate income from PT Cahaya.

E(7) Income to Noncontrolling Interest 15,800Dividends Declared 5,000Noncontrolling Interest 10,800

Assign income to noncontrollingshareholders of PT Cahaya:Rp15,800 = (Rp60,000 + Rp19,000) x .20Rp5,000 = Rp25,000 x .20Rp10,800 = Rp15,800 - Rp5,000


9 - 24

Chapter 9

P9-18 (continued)

E(8) Common Stock — PT Cahaya 400,000,000Retained Earnings, January 1 270,000,000Differential 24,000,000

Investment in PT Cahaya Stock 560,000,000Noncontrolling Interest 134,000,000

Eliminate investment in PT Cahayastock:Rp270,000,000 = Rp200,000,000 + Rp35,000,000 +

Rp35,000,000Rp24,000,000 = Rp40,000,000 - Rp8,000,000 -

Rp8,000,000Rp560,000,000 = Rp520,000,000 + [(Rp60,000,000 -

Rp25,000,000) x .80 - Rp8,000,000] x 2 yearsRp134,000,000 = (Rp400,000,000 + Rp270,000,000) x

.20

E(9) Trademark 24,000,000Differential 24,000,000

Assign beginning differential:Rp40,000,000 - (Rp8,000,000 x 2 years)

E(10) Amortization Expense 8,000,000Trademark 8,000,000

Amortize differential related totrademark: Rp40,000,000 / 5 years


9 - 25

Chapter 9

P9-16 Subsidiary Stock Dividend

Investment elimination entry, January 1, 20X8:

Alternative 1: PT Prima Perkasa stock is split 2:1.

E(1) Common Stock — PT Prima Perkasa 100,000,000Additional Paid-In Capital 70,000,000Retained Earnings 280,000,000

Investment in PT Prima Perkasa Stock 306,000,000Noncontrolling Interest 144,000,000

Alternative 2: A stock dividend of 4,000 shares is issued.



Alternative 3: A stock dividend of 1,500 shares is issued.




9 - 26

Chapter 9

P9-17 Subsidiary Preferred Stock Outstanding

a. Eliminating entries, January 1, 20X5:

Preferred Stock — PT Prabu 200,000,000Retained Earnings 32,000,000

Investment in PT Prabu Preferred Stock 92,800,000Noncontrolling Interest 139,200,000

Eliminate preferred stock:Rp32,000,000 = (Rp200,000,000 x .08) x 2 years

Common Stock — PT Prabu 150,000,000Retained Earnings 168,000,000

Investment in PT Prabu Common Stock 222,600,000Noncontrolling Interest 95,400,000

Eliminate common stock:Rp168,000,000 = Rp200,000,000 -

Rp32,000,000

b. Consolidated net income:Operating income of PT Erlangga Rp80,000,000Income from preferred stock of PT Prabu

(Rp16,000,000 x .40) 6,400,000Income from common stock of PT Prabu

[(Rp34,000,000 - Rp16,000,000) x .70] 12,600,000Consolidated net income Rp99,000,000

Income to noncontrolling interest:Income from preferred stock of PT Prabu

(Rp16,000,000 x .60) Rp 9,600,000Income from common stock of PT Prabu

[(Rp34,000,000 - Rp16,000,000) x .30] 5,400,000Income to noncontrolling shareholders Rp15,000,000


9 - 27

Chapter 9

P9-18 Ownership of Subsidiary Preferred Stock

a. Preferred stockholders' claim on net assets of PT Jayakarta:

Liquidation value of preferred stock (Rp101 per share) Rp202,000,00020X6 dividends in arrears (Rp200,000,000 x .10) 20,000,000Total preferred stockholder claim, December 31, 20X6 Rp222,000,000

b. Book value of PT Jayakarta common shares purchased by PT Pelita:

Total PT Jayakarta stockholders' equity, December 31, 20X6 Rp3,155,000,000Claim of preferred stockholders (222,000,000)Book value of PT Jayakarta common stock Rp2,933,000,000Portion acquired by PT Pelita x .60Book value of common shares purchased by PT Pelita Rp1,759,800,000

c. Goodwill associated with purchase of common shares:

Purchase price of common shares Rp1,800,000,000Book value of common shares purchased (1,759,800,000)Goodwill Rp 40,200,000

d. Income to noncontrolling interest, 20X7:

PT Jayakarta net income Rp280,000,000Less: 20X7 preferred dividends (Rp200,000 x .10) (20,000,000)Income accruing to common shareholders Rp260,000,000Noncontrolling common shareholders' interest x .40 Income to noncontrolling common shareholders Rp104,000,000Preferred dividends to noncontrolling

shareholders (Rp20,000,000 x .80) 16,000,000Total income to noncontrolling shareholders Rp120,000,000

e. PT Pelita's income from investment in subsidiary common stock:

PT Jayakarta net income Rp280,000,000Less: 20X7 preferred dividends (Rp200,000,000 x .10) (20,000,000)Income accruing to common shareholders Rp260,000,000PT Pelita's proportionate share x .60 PT Pelita's share of income to common shareholders Rp156,000,000

f. Noncontrolling interest, December 31, 20X7:

PT Jayakarta stockholders' equity, January 1, 20X7 Rp3,155,000,00020X7 net income 280,000,000Less: Preferred dividends (40,000,000)Less: Common dividends (10,000,000)Total PT Jayakarta stockholders' equity, December 31, 20X7 Rp3,385,000,000Claim of preferred stockholders (202,000,000)Book value of PT Jayakarta' common stock Rp3,183,000,000Noncontrolling stockholders' interest x .40Noncontrolling interest — common Rp1,273,200,000


9 - 28

Chapter 9

P9-18 (continued)

Total PT Jayakarta preferred stockholders' equity,January 1, 20X7 Rp222,000,000

Less: Dividends in arrears paid during 20X7 (20,000,000)PT Jayakarta preferred stockholders' equity,

December 31, 20X7 Rp202,000,000Noncontrolling stockholders' interest x .80Noncontrolling interest — preferred Rp161,600,000

Noncontrolling interest — common Rp1,273,200,000Noncontrolling interest — preferred 161,600,000Total noncontrolling interest Rp1,434,800,000

g. Eliminating entries:

E(1) Income from Subsidiary 156,000,000Dividends Declared — Common 6,000,000Investment in PT Jayakarta Common Stock 150,000,000

Eliminate income from subsidiary.

E(2) Dividend Income — Preferred 8,000,000Dividends Declared — Preferred 8,000,000

Eliminate dividend income from subsidiarypreferred stock: Rp40,000,000 x .20

E(3) Income to Noncontrolling Interest 120,000,000Dividends Declared — Common 4,000,000Dividends Declared — Preferred 32,000,000Noncontrolling Interest 84,000,000

Assign income to noncontrolling interest:Rp4,000,000 = Rp10,000,000 x .40Rp32,000,000 = Rp40,000,000 x .80

E(4) Common Stock — PT Jayakarta Jacuzzi 500,000,000Additional Paid-In Capital — Common 800,000,000Premium on Preferred Stock 3,000,000 *Retained Earnings, January 1 1,630,000,000 **Goodwill 40,200,000

Investment in PT Jayakarta Common Stock 1,800,000,000Noncontrolling Interest 1,173,200,000

Eliminate beginning investment incommon

stock:Rp3,000,000 = Rp5,000,000 - Rp2,000,000Rp1,630,000,000 = Rp1,650,000,000 - Rp20,000,000Rp1,173,200,000 = (Rp500,000,000 +

Rp800,000,000+ Rp3,000,000 + Rp1,630,000,000) x .40

*Portion accruing to common shareholders

**Portion accruing to common shareholders after deductingpreferred dividends in arrearsSolutions Manual – Baker / Lembke / King / Jeffrey, Advanced Financial Accounting, 7e

9 - 29

Chapter 9

P9-18 (continued)

E(5) Goodwill Impairment Loss 26,000,000

Goodwill 26,000,000

Recognize goodwill impairment loss.

E(6) Preferred Stock — PT Jayakarta 200,000,000

Premium on Preferred Stock 2,000,000 *Retained Earnings, January 1 20,000,000 **

Investment in Jacobs Preferred Stock 42,000,000

Additional Paid-In Capital —Retirement of Preferred Stock 2,400,000


Eliminate subsidiary preferred stock:

Rp2,000,000 = Rp5,000,000 - Rp3,000,000

Rp20,000,000 = Rp200,000,000 x .10

Rp2,400,000 = (Rp222,000,000 x .20) - Rp42,000,000

Rp177,600,000 = Rp222,000,000 x .8

*Portion representing call premium

**Portion relating to preferred dividends in arrears

P9-19 Consolidation Workpaper with Subsidiary Preferred Stock

a. Eliminating entries:


Dividends Declared — Common Stock 9,000,000

Investment in PT Wijaya Kusuma Common 49,500,000

Stock

E(2) Dividend Income 9,000,000

Dividends Declared — Preferred Stock 9,000,000


Dividends Declared — Preferred Stock 6,000,000

Dividends Declared — Common Stock 1,000,000


E(4) Common Stock — PT Wijaya Kusuma 100,000,000

Corporation


Investment in PT Wijaya Kusuma Common Stock 315,000,000


E(5) Preferred Stock — PT Wijaya Kusuma 200,000,000

Corporation

Investment in PT Wijaya Kusuma Preferred Stock 120,000,000


E(6) Dividends Payable 9,000,000

Dividends Receivable 9,000,000


9 - 30

Chapter 9

P9-19 (continued)

b. PT Buana and PT Wijaya Kusuma

Consolidation Workpaper

December 31, 20X6

PT Wijaya

PT Buana Kusuma Eliminations Consol-

Item ________ __________ Debit Credit idated

Sales 500,000,000 300,000,000 800,000,000

Dividend Income 9,000,000 (2) 9,000,000

Income from 58,500,000 (1) 58,500,000

Subsidiary

Credits 567,500,000 300,000,000 800,000,000

Cost of Goods Sold 280,000,000 170,000,000 450,000,000

Deprec. and Amort. 40,000,000 30,000,000 70,000,000

Other Expenses 131,000,000 20,000,000 151,000,000

Debits (451,000,000) (220,000,000) (671,000,000)

Income to Noncon- 129,000,000

trolling Interest (3) 12,500,000 (12,500,000)

Net Income,

carry forward 116,500,000 80,000,000 80,000,000 116,500,000

Retained Earnings,

Jan. 1Net Income, from

435,000,000 250,000,000 (4) 250,000,000 435,000,000

116,500,000 80,000,000 80,000,000 116,500,000

above

551,500,000 330,000,000 551,500,000

Dividends Declared

Preferred Stock (15,000,000) (2) 9,000,000

(3) 6,000,000

Common Stock (60,000,000) (10,000,000) (1) 9,000,000

(3) 1,000,000 (60,000,000 )Ret. Earnings, Dec. 31,

carry forward 491,500,000 305,000,000 330,000,000 25,000,000 491,500,000

Cash 58,000,000 100,000,000 158,000,000

Accounts Receivable 80,000,000 120,000,000 200,000,000

Dividends Receivable 9,000,000 (6) 9,000,000

Inventory 100,000,000 200,000,000 300,000,000

Bldgs. and Equip. (net) 360,000,000 270,000,000 630,000,000

Investment in PT

Wijaya Kusuma:

Preferred Stock 120,000,000 (5) 120,000,000

Common Stock 364,500,000 (1) 49,500,000

(4) 315,000,000

Debits 1,091,500,000 690,000,000 1,288,000,000

Accounts Payable 100,000,000 70,000,000 170,000,000

Dividends Payable 15,000,000 (6) 9,000,000 6,000,000

Bonds Payable 300,000,000 300,000,000

Preferred Stock (5) 200,000,000

200,000,000

Common Stock 200,000,000 100,000,000 (4) 100,000,000 200,000,000


9 - 31

Chapter 9

Ret. Earnings, from 491,500,000 305,000,000 330,000,000 25,000,000 491,500,000

above

Noncontrolling Interest (3) 5,500,000

(4) 35,000,000

(5) 80,000,000 120,500,000

Credits 1,091,500,000 690,000,000 639,000,000 639,000,000 1,288,000,000


9 - 32

Chapter 9

P9-20 Subsidiary Stock Transactions

a. (1) Book value of PT Brajamusti stock outstanding Rp500,000,000

Cost of treasury shares repurchased (68,000,000)

Book value of remaining shares Rp432,000,000

outstanding

Proportion of remaining shares held by PT

Andalas

(7,500 / 9,000) x .833

Adjusted book value of shares held by PT Rp360,000,000

Andalas

Book value of shares held by PT Andalas before treasury

stock repurchase by PT Brajamusti (Rp500,000,000 x .75) 375,000,000

Decrease in carrying value of shares held by PT Andalas Rp (15,000,000)

(2) Journal entry recorded by PT Andalas Corporation:

Retained Earnings 15,000,000

Investment in PT Brajamusti Stock 15,000,000

(3) Eliminating entries:



Rp45,000,000 x .833



Rp45,000,000 x .167

E(3) Common Stock — PT Brajamusti 100,000,000



Treasury Stock 68,000,000



b. (1) Book value of PT Brajamusti stock outstanding Rp500,000,000

Cost of treasury shares repurchased (68,000,000)

Book value of remaining shares outstanding Rp432,000,000

Proportion of remaining shares held by PT Andalas

(6,500 / 9,000) x .722

Adjusted book value of shares held by PT Andalas Rp312,000,000

Book value of shares held by PT Andalas before treasury

stock repurchase by PT Brajamusti (Rp500,000,000 x .75) (375,000,000)

Change in carrying value of shares held by PT Andalas Rp (63,000,000)

(2) Journal entry recorded by PT Andalas Corporation:

Cash 68,000,000


Gain on Sale of Investment 5,000,000


9 - 33

Chapter 9

P9-20 (continued)

(3) Eliminating entries:

E(1) Gain on Sale of Investment 5,000,000Additional Paid-In Capital 5,000,000

E(2) Income from Subsidiary 32,500,000Investment in PT Brajamusti Stock 32,500,000

Rp45,000,000 x .722

E(3) Income to Noncontrolling Interest 12,500,000Noncontrolling Interest 12,500,000

Rp45,000,000 x .278

E(4) Common Stock — PT Brajamusti 100,000,000Additional Paid-In Capital 80,000,000Retained Earnings, January 1 320,000,000

Treasury Stock 68,000,000Investment in PT Brajamusti Stock 312,000,000Noncontrolling Interest 120,000,000

P9-21 Sale of Subsidiary Shares

a. Eliminating entries:

E(1) Gain on Sale of PT Eka Karya Stock 10,000,000Additional Paid-In Capital 10,000,000

Eliminate gain on sale of PT Eka Karyashares:

Rp60,000,000 - (Rp250,000,000 x .20)

E(2) Income from Subsidiary 18,000,000Dividends Declared 6,000,000Investment in PT Eka Karya Stock 12,000,000

Eliminate income from subsidiary:Rp18,000,000 = .60(Rp170,000,000 - Rp140,000,000)


Assign income to noncontrolling interest:Rp12,000,000 = .40(Rp170,000,000 - Rp140,000,000)

E(4) Common Stock — PT Eka Karya 100,000,000Additional Paid-In Capital 20,000,000Retained Earnings, January 1 130,000,000

Investment in PT Eka Karya Stock 150,000,000Noncontrolling Interest 100,000,000

Eliminate investment in common stock.


9 - 34

Chapter 9

P9-21 (continued)

b. PT Pronto and PT Eka Karya


December 31, 20X4

PT Eka Karya

PT Pronto Eliminations Consol-

Item ______ _______ Debit Credit idated

Sales 280,000,000 170,000,000 450,000,000

Gain on Sale of PT Eka

Karya

Company Stock 10,000,000 (1) 10,000,000

Income from Subsidiary 18,000,000 _______ (2) 18,000,000

Credits 308,000,000 170,000,000 450,000,000

Cost of Goods Sold 210,000,000 100,000,000 310,000,000

Depreciation Expense 20,000,000 15,000,000 35,000,000

Other Expenses 21,000,000 25,000,000

46,000,000

Debits (251,000,000) (140,000,000) (391,000,000)

59,000,000

Income to Noncon-

trolling Interest (3) 12,000,000 (12,000,000)

Net Income,

carry forward 57,000,000 30,000,000 40,000,000 47,000,000

Retained Earnings,

January 1 320,000,000 130,000,000 (4)130,000,000 320,000,000

Net Income, from above 57,000,000 30,000,000 40,000,000 47,000,000

377,000,000 160,000,000 367,000,000

Dividends Declared (15,000,000) (10,000,000) (2) 6,000,000

(3) 4,000,000 (15,000,000 )Ret. Earnings, Dec. 31,

carry forward 150,000,000 170,000,000 10,000,000 352,000,000

362,000,000

Cash 30,000,000 35,000,000 65,000,000


Inventory 120,000,000 100,000,000 220,000,000

Buildings and

Equipment 650,000,000 230,000,000 880,000,000

Investment in PT Eka Karya

Company Stock 162,000,000 (2) 12,000,000

(4) 150,000,000

Debits 1,032,000,000 415,000,000 1,285,000,000

Accum. Depreciation 170,000,000 95,000,000 265,000,000


Bonds Payable 200,000,000 30,000,000 230,000,000

Common Stock 200,000,000 100,000,000 (4)100,000,000 200,000,000

Additional Paid-In

Capital 50,000,000 20,000,000 (4) 20,000,000 (1) 10,000,000 60,000,000

Retained Earnings,

from above 362,000,000 150,000,000 170,000,000 10,000,000 352,000,000


9 - 35

Chapter 9

Noncontrolling Interest (3) 8,000,000(4)100,000,000 108,000,000

Credits 1,032,000,000 415,000,000 290,000,000 290,000,000 1,285,000,000


9 - 36

Chapter 9

P9-21 Sale of Shares by Subsidiary to Nonaffiliate

a. E(1) Common Stock — PT Dahlia 240,000,000Additional Paid-In Capital 190,000,000Retained Earnings 350,000,000

Investment in PT Dahlia Stock 520,000,000Noncontrolling Interest 260,000,000

Eliminate investment in common stock:Rp240,000,000 = Rp200,000,000 + (Rp10,000 x 4,000 shares)Rp190,000,000 = Rp50,000,000 + [(Rp45,000 - Rp10,000) x 4,000 shares]Rp520,000,000 = Rp780,000,000 x (16,000 shares / 24,000 shares)Rp260,000,000 = Rp780,000,000 x (8,000 shares / 24,000 shares)

Journal entry recorded by PT Citra:

Investment in PT Dahlia Stock 40,000,000Additional Paid-In Capital 40,000,000

Book value of shares held by PT Citra:After sale Rp780,000,000 x (16,000 / 24,000) Rp520,000,000Before sale Rp600,000,000 x (16,000 / 20,000) (480,000,000)Increase in book value Rp 40,000,000

b. PT Citra and PT DahliaConsolidated Balance Sheet Workpaper

January 1, 20X3

PT Citra PT Dahlia Eliminations Consol-Item ____ ____ Debit Credit idated

Cash 50,000,000 230,000,000 280,000,000Accounts Receivable 90,000,000 120,000,000 210,000,000Inventory 180,000,000 200,000,000 380,000,000Buildings & Equipment 700,000,000 600,000,000 1,300,000,000Investment in PT DahliaCorporation 520,000,000 (1)520,000,000

Total Debits 1,540,000,000 1,150,000,000 2,170,000,000

AccumulatedDepreciation 200,000,000 220,000,000 420,000,000

Accounts Payable 70,000,000 70,000,000 140,000,000Taxes Payable 80,000,000 80,000,000Mortgages Payable 250,000,000 250,000,000Common Stock 300,000,000 240,000,000 (1)240,000,000 300,000,000Additional Paid-InCapital 220,000,000 190,000,000 (1)190,000,000 220,000,000

Retained Earnings, 500,000,000 350,000,000 (1)350,000,000 500,000,000NoncontrollingInterest (1)260,000,000

260,000,000Total Credits 1,540,000,000 1,150,000,000 780,000,000 780,000,000 2,170,000,000


9 - 37

Chapter 9

P9-25 (continued)

c. PT Citra and SubsidiaryConsolidated Balance Sheet

January 1, 20X3

Current Assets:Cash Rp 280,000,000Accounts Receivable 210,000,000Inventory 380,000,000 Rp

870,000,000Noncurrent Assets:

Buildings and Equipment Rp1,300,000,000Less: Accumulated Depreciation (420,000,000) 880,000,000

Total Assets Rp1,750,000,000

Current Liabilities:Accounts Payable Rp 140,000,000Taxes Payable 80,000,000 Rp 220,000,000

Mortgages Payable 250,000,000Noncontrolling Interest 260,000,000Stockholders' Equity:

Common Stock Rp 300,000,000Additional Paid-In Capital 220,000,000Retained Earnings 500,000,000 1,020,000,000

Total Liabilities and Stockholders' Equity Rp1,750,000,000


9 - 38

Chapter 9

P9-26 Sale of Additional Shares to Parent

a. Eliminating entry:

E(1) Common Stock — PT Toronto 125,000,000


Retained Earnings 200,000,000

Buildings and Equipment 12,500,000

Investment in PT Toronto 412,500,000


Journal entry recorded by PT Toronto:

Cash 150,000,000

Common Stock 25,000,000


Journal entry recorded by Shady Lane:

Investment in PT Toronto Stock 150,000,000

Cash 150,000,000

b. PT Salemba and PT Toronto


January 2, 20X1

PT

PT Salemba Toronto Eliminations Consol-

Item _____ _______ Debit Credit idated

Cash 77,500,000 210,000,000 287,500,000


Inventory 100,000,000 180,000,000 280,000,000

Buildings and

Equipment 600,000,000 600,000,000 (1) 12,500,000 1,212,500,000

Investment in Tin

Products Stock 412,500,000 (1)412,500,000

Debits 1,250,000,000 1,090,000,000 1,940,000,000

Accum. Depreciation 150,000,000 240,000,000 390,000,000


Bonds Payable 400,000,000 300,000,000 700,000,000

Common Stock 200,000,000 125,000,000 (1)125,000,000 200,000,000

Additional Paid-In

Capital 50,000,000 175,000,000 (1)175,000,000 50,000,000

Retained Earnings, 400,000,000 200,000,000 (1)200,000,000 400,000,000

Noncontrolling

Interest (1)100,000,000 100,000,000 Total Credits 1,250,000,000 1,090,000,000 512,500,000 512,500,000 1,940,000,000


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