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(Solved): InstructionsPrepare consolidation working papers for Tom Corporation and Subsidiary for the yearende ...
Prepare consolidation working papers for Tom Corporation and Subsidiary for the year
ended December 31, 2009.
Tom Corporation acquired 70 percent of the outstanding voting shares of Jerry Company for $455,000 on January 1, 2009, when Jerry's stockholders' equity at book value was $650,000. Note that the acquisition price implies that the tal fair value of Jerry is $650,000($455,000,70%). All of the assets and liabilities of Son were stated at fair values (equal to book values) when Tom acquired its 70 percent interest.
Based on the provided financial statements, we can perform the following calculations and analysis:1. Calculation of Consolidated Net Income:The controlling share of net income for Jerry is $435,000, and the noncontrolling interest's share is $150,000. Therefore, the consolidated net income for Tom and Jerry is:Consolidated net income = Controlling share of net income + Noncontrolling interest shareConsolidated net income = $435,000 + $150,000Consolidated net income = $585,0002. Calculation of Consolidated Retained Earnings:The retained earnings for Tom at the beginning of the year are $300,000, and the controlling share of net income is $435,000. Dividends paid during the year are $150,000. Therefore, the consolidated retained earnings for Tom and Jerry are: