Consolidations-Changes in

Ownership Interests
Acquisitions During An Accounting Period_Preacquisition
Earnings
Assume, for example, that Pop Corporation purchases a 90
percent interest in Son Company on April 1, 20x1, for $427,500.
Son’s income, dividends, and equity for 20x1 are as follows.
Jan 1 to Apr 1 to Jan 1 to
March 31 Dec 31 Dec 31
Income
Sales $ 50.000 $ 150.000 $ 200.000
Cost of sales and expenses $ 25.000 $ 75.000 $ 100.000
Net Income $ 25.000 $ 75.000 $ 100.000
Dividends $ 20.000 $ 30.000 $ 50.000
Jan 1 Apr 1 Dec 31
Stockholders 'Equity
Capital stock $ 400.000 $ 400.000 $ 400.000
Retained Earnings $ 70.000 $ 75.000 $ 120.000
Stockholders' equity $470.000 $ 475.000 $ 520.000
Acquisitions During An Accounting Period_Preacquisition
Earnings
In recording income from its investment in Son at year-end, Pop
makes the following entry.

Investment in Son (+A) 67,500

Income from Son (R, +SE) 67,500
To record income from the last three quarters of 20x1 ($75,000 * 90%).
Conceptually, the consolidated income statement is affected as
follows:

Sales (last three quarters of 20x1) $ 150.000

Expenses (las three quarters of 20x1) $ (75.000)
Noncontrolling interest share (last three quarters of 20x1) $ (7.500)
Effect on controlling share of consolidated net income $ 67.500
Acquisitions During An Accounting Period_Preacquisition
Earnings
GAAP recommended consolidating subsidiary accounts in the
following manner:

Sales (full year) $ 200.000

Expenses (full year) $ (100.000)
Preacquisition income $ (22.500)
Noncontrolling interest share $ (10.000)
Effect on controlling share of consolidated net income $ 67.500
Acquisitions During An Accounting Period_Preacquisition
Dividends
Son paid $50,000 dividends during 20x1, but it paid $20,000 of this
amount before the acquisition by Pop. Accordingly, Pop makes the
following entry to account for dividends received (after the
acquisition):

Cash (+A) 27,000

Investment in Son (-A) 27,000
Record dividends received from Son.

Son’s allocations of income and dividends are as follows:

Controlling Noncontrolling Preacquisition
Total
Interest (Pop) Interest (10%) Eliminations
Son's net income $ 67.500 $ 10.000 $ 22.500 $ 100.000
Son's dividends $ 27.000 $ 5.000 $ 18.000 $ 50.000
Acquisitions During An Accounting Period_Consolidation

Workpaper entry a eliminates the income from Son and dividends

received from Son and returns the Investment in Son account to its
$427,500 balance at acquisition on April 1, 20x1:

a. Income from Son (R, SE) 67,500

Dividends—Son (SE) 27,000
Investment in Son (A) 40,500
To eliminate investment income and the dividends received from
Son and to adjust the investment in Son to its fair value on
April 1, 20x1.
 Acquisitions During An Accounting Period_Consolidation

b. Sales (R, SE)* 50,000

Capital stock—Son (SE) 400,000
Retained earnings—Son (SE) 70,000
Cost of sales and expenses (E, SE)* 25,000
Dividends—Son (SE)* 18,000
Investment in Son (A) 427,500
Noncontrolling interest—beginning (SE) 49,500
To eliminate reciprocal investment and equity balances, preacquisition
income, and preacquisition dividends and to record the beginning
noncontrolling interest.
The * items represent the preacquisition income and dividends. Note that
the beginning noncontrolling interest is the amount at the acquisition date.
It represents 10% of the January 1 beginning capital stock plus retained
earnings, plus the preacquisition earnings [10% : (400,000 $70,000
$25,000)].
 Acquisitions During An Accounting Period_Consolidation

c. Noncontrolling interest share (SE) 7,500

Dividends—Son (SE) 5,000
Noncontrolling interest (SE) 2,500
To enter noncontrolling interest share of subsidiary’s postacquisition
earnings and dividends. The dividends also include preacquisition dividends
for noncontrolling interest
Acquisitions During An Accounting Period_Consolidation

20x1
 Piecemeal Acquisition…

20x1 20x3

20x1
20x2

20x3
 Piecemeal Acquisition…

20x1

20x2

20x3
 Piecemeal Acquisition…
20x3

20x1 20x3

20x1
20x2
20x3
 Piecemeal Acquisition…

20x3
20x3 20x3
Piecemeal Acquisition…

20x3
 SALE OF OWNERSHIP INTERESTS_ Sale of an Interest at
the Beginning of the period…
Sun Corporation is a 90 percent–owned subsidiary of Pam
Corporation. Pam’s Investment in Sun account at January 1, 20x2,
has a balance of $288,000, consisting of its underlying equity in Sun
plus $18,000 goodwill. (Implied total goodwill is therefore $20,000.)
Sun’s stockholders’ equity at January 1, 20x2, consists of $200,000
capital stock and $100,000 retained earnings. During 20x2, Sun
reports income of $36,000, earned proportionately throughout the
year, and it pays dividends of $20,000 on July 1.
 SALE OF OWNERSHIP INTERESTS_ Sale of an Interest at
the Beginning of the period…
If Pam sells a 10 percent interest in Sun (one-ninth of its holdings)
on January 1, 20x2, for $40,000, we record no gain or loss on the
sale. Pam maintains an 80 percent controlling interest in Sun, and
the noncontrolling interest increases to 20 percent. Recorded assets
and liabilities of Sun, including goodwill, are unaffected. Pam makes
the following entry to record the sale:

Cash (+A) 40,000

Investment in Sun (-A) 32,000
Additional paid-in capital—Pam (+SE) 8,000
To record sale of a 10% interest in Sun.
 SALE OF OWNERSHIP INTERESTS_ Sale of an Interest at
the Beginning of the period…
During 20x2, Pam accounts for its 80 percent interest under the
equity method and records income of $28,800 ($36,000 net income
of Sun * 80%) and a reduction in its investment account for
dividends received. At December 31, 20x2, Pam’s Investment in Sun
account has a balance of $268,800, computed as follows:

Investment balance Jan 1, 20x2 $ 288.000

Less : Book value of interest sold $ 32.000
$ 256.000
Add : Income less dividends ($28.800 - $16.000) $ 12.800
Investment balance Dec 31, 20x2 $ 268.800
 SALE OF OWNERSHIP INTERESTS_ Sale of an Interest at
the Beginning of the period…
The workpaper entries in general journal form:
a. Income from Sun (R, SE) 28,800
Dividends—Sun (SE) 16,000
Investment in Sun (A) 12,800
To eliminate income and dividends from Sun and return the investment
account to its beginning-of-the-period balance after the sale
of the 10% interest.
 SALE OF OWNERSHIP INTERESTS_ Sale of an Interest at
the Beginning of the period…
b. Capital stock—Sun (SE) 200,000
Retained earnings—Sun (SE) 100,000
Goodwill (A) 20,000
Investment in Sun (A) 256,000
Noncontrolling interest (20%) (SE) 64,000
To eliminate reciprocal investment and equity balances, and to record
goodwill and beginning noncontrolling interest.

c. Noncontrolling interest share (SE) 7,200

Dividends—Sun (SE) 4,000
Noncontrolling interest (SE) 3,200
To enter noncontrolling interest share of subsidiary income and dividends.
SALE OF OWNERSHIP INTERESTS_ Sale of an Interest at
the Beginning of the period…
20x2
 SALE OF OWNERSHIP INTERESTS_ Sale of an Interest
During an Accounting period…
If Pam sells the 10 percent interest in Sun on April 1, 20x2, for
$40,000, the sale may be recorded as of April 1, 20x2, or, as an
expedient, as of January 1, 20x2. Assuming that Pam records the
sale as of January 1, 20x2, Pam records the $8,000 stockholders’
equity effect the same as in the beginning-of-the-year sale situation
and makes the same one-line consolidation entries as those
previously illustrated.
 SALE OF OWNERSHIP INTERESTS_ Sale of an Interest
During an Accounting period…
If the sale is recorded as of April 1, 20x2, the stockholders’ equity
effect will be $7,100, computed as:

Selling price of 10% interest 40.000

Less : Book value of the interest sold :
Investment balance Jan 1 288.000
Equity in income $36.000 x 1/4 year x 90% 8.100
296.100
Portion of investment sold x 1/9 32.900
Stockholders' equity effect 7.100
 SALE OF OWNERSHIP INTERESTS_ Sale of an Interest
During an Accounting period…
Journal entries on Pam’s books during 20x2 to account for the 10
percent interest sold and its investment in Sun are as follows:

April 1, 20x2
Investment in Sun (+A) 8,100
Income from Sun (R, +SE) 8,100
To record income for first quarter ($8,100 equity in income).
Cash (+A) 40,000
Investment in Sun (-A) 32,900
Additional paid-in Capital (+SE) 7,100
To record sale of a 10% interest in Sun. (See earlier computations.)
 SALE OF OWNERSHIP INTERESTS_ Sale of an Interest
During an Accounting period…
Journal entries on Pam’s books during 20x2 to account for the 10
percent interest sold and its investment in Sun are as follows:

July 1, 20x2
Cash (+A) 16,000
Investment in Sun (-A) 16,000
To record dividends received ($20,000 * 80%).
December 31, 20x2
Investment in Sun (+A) 21,600
Income from Sun (R, +SE) 21,600
To record income for last three quarters of 20x2.
 SALE OF OWNERSHIP INTERESTS_ Sale of an Interest
During an Accounting period…
The income from Sun for 20x2 is $29,700, consisting of $8,100 the first
quarter and $21,600 the last three quarters. At year-end, the
Investment in Sun account has the same $268,800 balance as in the
beginning-of-the-period sale, but the balance includes different
amounts:

Investment balance Jan 1 $ 288.000

Less : Book value of interest sold $ 32.900
$ 255.100
Add : Income less dividends $ 13.700
Investment balance Dec 31 $ 268.800
 SALE OF OWNERSHIP INTERESTS_ Sale of an Interest
During an Accounting period…
We journalize workpaper entries to consolidate financial statements as
follows:

a. Income from Sun (R, SE) 29,700

Dividends—Sun (SE) 16,000
Investment in Sun (A) 13,700
b. Capital stock—Sun (SE) 200,000
Retained earnings—Sun (SE) 100,000
Goodwill (A) 20,000
Investment in Sun (A) 255,100
Noncontrolling interest January 1 (SE) 32,000
Noncontrolling interest April 1 (SE) 32,900
c. Noncontrolling interest share (SE) 6,300
Dividends—Sun (SE) 4,000
SALE OF OWNERSHIP INTERESTS_ Sale of an Interest
During an Accounting period…
20x2
 SALE OF OWNERSHIP INTERESTS_ Sale of an Interest
During an Accounting period…
The investment balance at year-end is the same as before because
Pam holds the same ownership interest as under the beginning-of-
the-year sale assumption. Further, Pam has received the same cash
inflow from the investment ($40,000 proceeds from the sale and
$16,000 dividends). We explain the effects under the different
assumptions as follows :
Sale at or Assumed Sale within the
at Beginning of Period Accounting Period
Equity effect on sale of investment 8.000 7.100
Income from Sun 28.800 29.700
Total equity effect 36.800 36.800
TERIMA KASIH
 Ayat Dalam Alquran terkait Materi…
‫خفوه‬ ِ‫ضِ َوإهن تِبأدواِ َما هفىِ أَنف هسك أِم أَوأِ ت أ‬ ِ ‫ت َو َما هفى أٱْلَرأ ه‬ ِ‫ّ َه‬
ِ‫لِّل َما هفى ٱل َس َٰ َم َٰ َو ه‬
ِ‫ل َشىأ ءِ َق هدير‬ ِّ ِ‫ى ك‬ َِ ‫ٱلِّلِۖ َف َي أغ هفرِ له َمن َي َشاءِ َويِ ََع ُِِّّ َمن َي َشاءِِ َو‬
َِٰ ‫ٱلِّل َع َل‬ َِ ‫اسبأكم هب هِه‬‫ي َح ه‬
Lillāhi mā fis-samāwāti wa mā fil-arḍ, wa in tubdụ mā fī anfusikum
au tukhfụhu yuḥāsibkum bihillāh, fa yagfiru limay yasyā`u wa
yu'ażżibu may yasyā`, wallāhu 'alā kulli syai`ing qadīr.
“Kepunyaan Allah-lah segala apa yang ada di langit dan apa yang
ada di bumi. Dan jika kamu melahirkan apa yang ada di dalam
hatimu atau kamu menyembunyikan, niscaya Allah akan membuat
perhitungan dengan kamu tentang perbuatanmu itu. Maka Allah
mengampuni siapa yang dikehendaki-Nya dan menyiksa siapa yang
dikehendaki-Nya; dan Allah Maha Kuasa atas segala sesuatu. 1(QS
Al-Baqarah Ayat 284)”.