Problem 6-33 (LO 6-4) 5 Smih, Inc. has the following stockhoiders equity account
ID: 2528691 • Letter: P
Question
Problem 6-33 (LO 6-4) 5 Smih, Inc. has the following stockhoiders equity accounts as of January 1 2018 tock-5329 par onparticipating, Retained earnings cunulative dividend s2,18,eee Haried Company purchases all of Smith's common stock on Jenuery 1. 2018. for $14 250000 The preferred stock remains in the hands of outside parties. Any excess acquston-date fair v wil be assigned to franchise contracts wth 40yeer remsnngate During 2018, Smitn reports earning $550.000 in net income and deciares $460000 in cash dividends Haried applies the equity a. What is the noncontroliting innerest's share of consolideted net income for this perlod? b. Whet a the belence n the Ivestment in Smith acoount as of December 31. 20187 e What consolidation entries ane needed for 2018 Complete this question by entering your answers in the tabs belowe. a. What s the nencontroling interest s shaire of comsoidaed nincome for this periodt b. What is the balance in the Znvestment in Smith acount as of Dacmber 31. 2018Explanation / Answer
a) in the cummulative non controlling interest of preferred stock , only the specific dividend is partnered with the preferred stock and all the remaining income is assigned to common stock. this means 8% of of cummumlative dividend is the non controlling interest (NCI) share of the preferred share amount foe the consolidated net income
the NCI share of consolidated net income is =2,100,000 * 8% =$168,000
b)Balance of investment
Add:Equity Accrual(Income for common stock after preferred stock)
=$550,000- $168,000
working:1)Franchise amortisation
2)Equity Income Subsidiary
c)Journal Entries
Particulars Amount Purchase consideration $14,250,000Add:Equity Accrual(Income for common stock after preferred stock)
=$550,000- $168,000
$382,000 Less:Diviidends Collected($460,000 - $168,000) ($292,000) Less:Franchise Amortization* ($1,250) Investment Value $14,338,750