On January 1,2014,Klode Corporation Acquired an 80% Interest in Savy\[\begin{array} { l l l } & \text { Klode Company } & \text { Savy Company } \\ \text { Net income } & \$ 70,000 & \$ 50,000 \\ \text { Dividends } & 0 & 0 \end{array}\]

The Answer of On January 1,2014,Klode Corporation Acquired an 80% Interest in Savy\[\begin{array} { l l l } & \text { Klode Company } & \text { Savy Company } \\ \text { Net income } & \$ 70,000 & \$ 50,000 \\ \text { Dividends } & 0 & 0 \end{array}\]

On January 1,2014,Klode Corporation Acquired an 80% Interest in Savy\[\begin{array} { l l l } & \text { Klode Company } & \text { Savy Company } \\ \text { Net income } & \$ 70,000 & \$ 50,000 \\ \text { Dividends } & 0 & 0 \end{array}\]

The Answer of On January 1,2014,Klode Corporation Acquired an 80% Interest in Savy\[\begin{array} { l l l } & \text { Klode Company } & \text { Savy Company } \\ \text { Net income } & \$ 70,000 & \$ 50,000 \\ \text { Dividends } & 0 & 0 \end{array}\]

Solved

On January 1,2014,Klode Corporation Acquired an 80% Interest in Savy

question 33

Essay

On January 1,2014,Klode Corporation acquired an 80% interest in Savy Company for $400,000 when Savy's stockholders' equity was $500,000; with Common stock $400,000 and Retained earnings $100,000.
On January 1,2014,Savy purchased a 10% interest in Klode for $50,000 when Klode's total stockholders' equity was $500,000; with Common stock $400,000 and Retained earnings $100,000.
The following data was available for the year ending December 31,2014:
$\begin{array} { l l l } & \text { Klode Company } & \text { Savy Company } \\\text { Net income } & \$ 70,000 & \$ 50,000 \\\text { Dividends } & 0 & 0\end{array}$ Use the conventional approach to account for the mutually-held stock.Assume there were no book value/fair value differentials for each investment.The separate net incomes do not include investment income.
Required:
1.Prepare the journal entry for Klode on January 1,2014.
2.Prepare the journal entry for Savy on January 1,2014.
3.Prepare the journal entry to record the constructive retirement of 10% of Klode's outstanding stock due to Savy's purchase of Klode's stock.
4.Determine the incomes of Klode and Savy on a consolidated basis with mutual income for 2014 using simultaneous equations.
5.What is controlling interest share of consolidated net income and noncontrolling interest shares for 2014?

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Definitions:

Book Value

The net value of a company's assets, less its liabilities and intangible assets, as recorded on the balance sheet.

Market Value

The current price at which an asset or service can be bought or sold in the marketplace, which fluctuates based on supply and demand dynamics.

Goodwill

An intangible asset that arises when a business is purchased for more than the fair value of its net assets, reflecting reputation, brand, etc.

Incremental Value

The additional value created by a specific action or decision, compared to what would have occurred without it.