[WestonM]

Jane Co. owns 90% of the common stock of Dun Corp. and 100% of the common stock of Beech Corp. On December 30, Dun and Beech each declared a cash dividend of $100,000 for the current year. What is the total amount of dividends that should be reported in the December 31 consolidated financial statements of Jane and its subsidiaries, Dun and Beech?

a. $10,000 b. $100,000 c. $190,000 d. $200,000

I understand. This question, just had a question on a couple variations.

1. Assume original percentages and the instead of dividends, Dun and Beech had net income of the same amounts. Would net income reported on consolidated financials be 10,000

2. Assume original facts. Jane issued dividends of 10,000. Would total dividends on consolidated statements be 20,000

3. Assume the percentages were 40% for each, they wouldn’t consolidate right? Then what would be the impact?

This is one of my weaker areas and I’m trying to get everything straightened out

Thanks

BEC: 93 4/18/13
FAR: 89 7/3/13
REG: 90 8/30/13
AUD: 95 11/29/13

DONE!

[peterolintoisawesome]

1. Income is different from dividends. Remember when you consolidate there are no dividends, except for the non controlling interest. However, you do still report income,therefore income from Beech would be 100k and Dun would be 100K with 90 k to Jane and 10k to the NCI

2. I'm not so sure, but If Jane issued dividends it would not show up on the consolidated financial statements, Jane owns the other two companies and therefore would not issue dividends to the companies they own, since it would go back right to them. If anything it would just show up as a dividend payable on the balance sheet of 10,000 if declared, but not paid

3. They would not consolidate, but still have to use the equity method of accounting. No dividends would be recorded by Jane, but they would have to decrease their investment in both Beech and Dun by 40,000 dollars.

Hope that helped.

AUD-96
BEC-83
FAR-7/19/13
REG-87

[WestonM]

Thanks that helped a lot. I'm still trying to think through variation #2

BEC: 93 4/18/13
FAR: 89 7/3/13
REG: 90 8/30/13
AUD: 95 11/29/13

DONE!

[WestonM]

@PeterOlinto in variation 2. If it asked what was the total amount of dividends paid by Jan and its subs, would it then be $20,000?

BEC: 93 4/18/13
FAR: 89 7/3/13
REG: 90 8/30/13
AUD: 95 11/29/13

DONE!

[peterolintoisawesome]

I didnt see that you would assume original facts. The 10,000 dividend would still exist for the NCI, but if Jan issued 10,000 dividends, it would not be a dividend Jan would get, it would get paid to their shareholder. (this is covered in f7 and has nothing to do with consolidation. Therefore we would report 10,000 of dividends, and a 10,000 dividend payable when declared, then removed when paid.

AUD-96
BEC-83
FAR-7/19/13
REG-87

[WestonM]

Gotcha. Thanks again.

BEC: 93 4/18/13
FAR: 89 7/3/13
REG: 90 8/30/13
AUD: 95 11/29/13

DONE!

[Author]

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