[hasy]

I know that this is learning more. But I just want to know why. During consolidations for an entity where the parent only owns 90% of the subsidiary, for the journal entries required to consolidation at the end. Why is that when they account for deprecation for an equipment whose FV exceeds their BV by $100 (with 5 years of useful life) as such

Equity in earnings 20

Investment 20

shouldn’t it be like this

Equity in earnings 18 (20*90%)

Investment 18 (20*90%)

since you know, you’re using equity method at the end of the year. You’re using equity method for dividends, why not the deprecation for the equipment as well. Some opinions would be nice so I can remember this better. BTW, I’m using Roger’s so I’m not sure his is wrong. If it is, then there’s problems.

Character cannot be developed in ease and quiet. Only through experience of trial and suffering can the soul be strengthened, ambition inspired, and success achieved - Helen Keller

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BEC 80 (10/23/15)
FAR 72 (4/2/15); 83 (7/11/16)
REG 52 (4/28/15)
AUD (9/9/16)

Roger + NINJA MCQ + WTB

[Anonymous]

Good question. I cannot recall the answer from my advanced accounting class taken last semester. I think using 18 is more representative of the 90% ownership in the subsidiary. However, GAAP may have some kind of reasoning to account for the full 20. Very strange.

[Author]

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