On January 2, 2011, Pare Co. purchased 75% of Kidd Co.’s outstanding common stoc
ID: 2444969 • Letter: O
Question
On January 2, 2011, Pare Co. purchased 75% of Kidd Co.’s outstanding common stock. On that date, the fair value of the 25% noncontrolling interest was $35,000. During 2011, Kidd had net income of $20,000. Selected balance sheet data at December 31, 2011, is as follows:
Pare Kidd Total assets $420,000 $180,000 Liabilities $120,000 $60,000 Common stock 100,000 50,000 Retained earnings 200,000 70,000 $420,000 $180,000 During 2011 Pare and Kidd paid cash dividends of $25,000 and $5,000, respectively, to their shareholders. There were no other intercompany transactions.
. In its December 31, 2011 consolidated statement of retained earnings, what amount should Pare report as dividends paid?
a. $ 5,000
b. $25,000
c. $26,250
d. $30,000
e. $35,000.
In Pare’s December 31, 2011 consolidated balance sheet, what amount should be reported as noncontrolling interest in net assets?
a. $30,000
b. $35,000
c. $38,750
d. $40,000
e. $48,000
In its December 31, 2011 consolidated balance sheet, what amount should Pare report as common stock?
a. $ 50,000
b. $100,000
c. $137,500
d. $150,000
e. $158,000
Explanation / Answer
In consolidated statement amount of dividend paid will be =
Dividend paid by Pare Co. $25,000 + Dividend paid by Kidd Co. ($5,000 x 25 / 100) = $26,250.
Amount of non-controlling interest in net assets in the consolidated balance sheet will be =
Value of common stock of non-controlling interest as on 2nd Jan. 2011 $ 35,000 + (20,000 x 25 / 100) = $40,000.
Amount of Common Stock as on December 31, 2011 in the consolidated balance sheet will be $1,00,000 because this already includes amount of common stock purchased by Pare Co. in the Kidd Co.
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