Consolidations

Question 1

What effect does a reduction in retained earnings (such as dividend declaration) have on non-controlling (minority) interest

Answer 1

Reduces

Question 2

What effect do gains & losses of the parent company have on the non-controlling interest

Answer 2

None

Question 3

What Accounts are eliminated in consolidation?

Answer 3

Stockholder’s Equity of the acquired(goes to investment)

Intercompany Sales, payables, etc.

Question 4

Buy 100% of subsidiary with cash JE

Answer 4

DR investment in sub

CR Cash

Question 5

JE for buying a company (consolidated adjustment w formulas)

Answer 5

DR (Assets at FV)
DR Goodwill(Cash paid - fmv of assets - liabilities
CR Liabilities
CR investment in Sub(cash outlay)

Question 6

What does the parent company report for dividends paid

Answer 6

Dividends paid to its own shareholders. Dividends paid to the parent from the subsidiary will be eliminated in consolidation. Additionally, dividends paid to shareholders that are not related to the parent will be reported as an adjustment to the non-controlling interest account

Question 7

When calculating the stockholders equity account for a consolidated entity where the parent owns less than 100 percent of the company what must be considered in the formula

Answer 7

Total SE of parent + non-controlling interest of subsidiary

Question 8

How is common stock reported for a non-controlling minority interest in a consolidation

Answer 8

Separately from parent common stock as part of non-controlling (minority) interest.