On January 1, 2016, Parent Company Purchased 8,000 Shares of the Common

question 16

Essay

On January 1, 2016, Parent Company purchased 8,000 shares of the common stock of Subsidiary Company for $350,000.On this date, Subsidiary had 20,000 shares of $5 par common stock authorized, 10,000 shares issued and outstanding.Other paid-in capital and retained earnings were $150,000 and $200,000 respectively.On January 1, 2016, any excess of cost over book value is due to a patent, to be amortized over 15 years.Parent Company uses the simple equity method to account for its investment in Sub.
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Subsidiary's net income and dividends for two years were:
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$$\begin{array} { l r r } & 2016 & 2017 \\\text { Netincome } & \$ 50,000 & \$ 90,000 \\\text { Dividends } & 10,000 & 30,000\end{array}$$ On January 1, 2017, Subsidiary Company sold an additional 2,500 shares of common stock to non-controlling shareholders for $50 per share.
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In the last quarter of 2017, Subsidiary Company sold goods to Parent Company for $40,000.Subsidiary's usual gross profit on intercompany sales is 40%.On December 31, $7,500 of these goods are still in Parent's ending inventory.
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Required: Prepare the following items
a.Determination and distribution schedule effective 1/1/16
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b.Parent's journal entry to record change in ownership interest due to Sub's issuance of additional shares on 1/1/17.Support with schedule of Parent's ownership interest before and after the 1/1/17 issuance.?
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c.All necessary elimination entries necessary to prepare the consolidating worksheet on 12/31/17
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Definitions:

Accessories Segment

A part of a business that focuses on products that are meant to complement the main product offerings, often enhancing the user experience.

Fixed Expenses

Costs that do not change with the level of output or activity within a certain period.

Break-Even

The point at which total revenues equal total costs, meaning there is neither profit nor loss.

Sales Dollars

The total monetary value of all sales transactions made by a company within a given period.