Assignment Advanced Accounting Beams [Exercise 9-3] PDF

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Summary

E 9-3 Mutual holdings—Treasury stock approach and conventional approach Penn AG acquired an 80 percent interest in Sinn AG on January 1, 2013, for $250,000, when Sinn’s common stock was at $200,000 and retained earnings at $80,000. Sinn AG, in turn, purchased a 10 percent interest in Penn AG for $80...

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E 9-3 Mutual holdings—Treasury stock approach and conventional approach Penn AG acquired an 80 percent interest in Sinn AG on January 1, 2013, for $250,000, when Sinn’s common stock was at $200,000 and retained earnings at $80,000. Sinn AG, in turn, purchased a 10 percent interest in Penn AG for $80,000, when Penn’s common stock was at $500,000 and its retained earnings were $200,000. During 2013, Penn’s income was $50,000 and Sinn’s income was $25,000.

Required : 1. Calculate controlling share of net income under the treasury stock approach. Jawab : Penn’s separate earnings

$50,000

Penn’s share of Sinn’s earnings (80% x $25,000) Controlling share of consolidated net income

$20,000 $70.000

2. Calculate controlling share of net income under the conventional approach. Jawab : P = Penn’s separate earnings of $50,000 + 80% S S = Sinn’s separate earnings of $25,000 + 10% P

P

= $50,000 + 0,8 ($25.000 + 0,1P) = $50.000 + $20.000 + 0,08P

0,96P = $70.000 P

= $70.000 0,96

P

= $76.087

S

= $25.000 + 0,1 (76.087) = $25.000 + $7.609 = $32,609

Penn’s separate earnings

$50.000

Penn’s share of Sinn’s earnings (80% x 32,609) - (20% x 76.087)

$18.478

Controlling share of consolidated net income

$68.478...