[tywebb85]

The below question is the only one I’ve seen in all of the WTB and NINJA MCQ’s that approaches / solves for a problem like this…Is it correct? From everything I’ve completed, I was under the impression that only the Parent’s Equity accounts were shown and that the NONControlling interest was shown separately at the bottom of the Financial Statements. Is this question just lumping the two together? Why? I don’t get it. Any input / guidance would be greatly appreciated. Exam is this Thursday.

On January 1, Year 1, Dallas, Inc., purchased 80% of Style, Inc.’s, outstanding common stock for $120,000. On that date, the carrying amounts of Style’s assets and liabilities approximated their fair values. During Year 1, Style paid $5,000 cash dividends to its stockholders. Summarized balance sheet information for the two companies follows:

Dallas Style
12/31/X1 12/31/X1 01/01/X1
——– ——– ——–
Investment in Style (equity method) $132,000
Other assets $138,000 $115,000 $100,000
Common stock 50,000 20,000 20,000
Additional paid-in capital 80,250 44,000 44,000
Retained earnings 139,750 51,000 36,000

What amount of total stockholders’ equity should be reported in Dallas’ December 31, Year 1, consolidated balance sheet?

A. $270,000
B. $293,000 — Correct
C. $362,000
D. $385,000

Under the principle of consolidation, the parent and subsidiary are considered a single economic entity. Thus, the consolidated balance sheet reports the combined (parent plus subsidiary) asset and liability accounts.

The single parent-sub entity owns all the net assets of both entities. Total stockholders’ equity accounts on the consolidated balance sheet equals the total stockholders’ equity of the parent plus the noncontrolling interest. Therefore, Dallas, Inc., reports total stockholders’ equity account on December 31, 20X1, of $270,000 ($50,000 + $80,250 + $139,750) plus 20% of the total stockholders’ equity of Style of $23,000 ($20,000 + $44,000 + $51,000), which is $293,000.

[Jakecpa]

I'm having the same issue, I know how to calculate it both ways, either just taking the parent's equity or calculating the parent's equity plus the FV of the NCI. I tried to clarify when to do either or, so far the only thing I could tell was that if they give me both the beginning balance and ending balance of the Noncontrolling interest then I could calculate the new ending NCI (Beg + %income – %dividends) and add that noncontrolling interest to the parent's. Then on some other questions they just hand you the parent's equity and the sub's equity, so when those questions come up, because they don't hand out the info about the sub's paid dividends or income created, I simply go for the parent's equity since everything ends up balancing out after the elimination entries. But that particular detail is the same issue I'm having in this topic. I wish someone else can enlighten us a little.

[Author]

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