Question

Sound Manufacturing Corporation prepared the following balance sheet as of January 1, 20X8 50,000 200,000 100,000 70,000 280,000 $700,000 $ 40,000 Accounts Payable Cash Accounts Receivable Inventory Buildings & Equipment Less: Accumulated Depreciation Total Assets 90,000 Bonds Payable 180,000 Common 500,000 Additional Paid-In Capital Stock (110,000) Retained Earnings 700,000 Total Liabilities &Equities The company is considering a 2-for-1 stock split, a stock dividend of 4,000 shares, or a stock dividend of 1,500 shares on its $10 par value common stock. The current market price per share of Sound stock on January 1, 20X8, is $50. Promise Sales Corporation acquired 68 percent of Sound's common shares on January 1, 20X4, at underlying book value. At that date, the fair value of the noncontrolling interest was equal to 32 percent of Sound's book value Required: Prepare the investment consolidation entry required to prepare a consolidated balance sheet at the close of business on January 1, 20X8, for each of the alternative transactions under consideration by Sound. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Investment Consolidation entry, January 1, 20X8:
Account Titles	Debit	Credit
Alternative 1: Sound Manufacturing stock split into 2:1.
Pound Manufacturing Common Stock	1,00,000
Paid-In Capital -Additional	70,000
Retained Earnings	2,80,000
Investment in Sound Manufacturing Stock		3,06,000
Non-controlling Interest		1,44,000
Alternative 2: A stock dividend issued for 4,000 .
Pound Manufacturing Common Stock	1,40,000
Paid-In Capital -Additional	70,000
Retained Earnings	2,40,000
Investment in Sound Manufacturing Stock		3,06,000
Non-controlling Interest		1,44,000
Alternative 3: A stock dividend is issued for 1,500 shares.
Pound Manufacturing Common Stock	1,15,000
Paid-In Capital -Additional	1,30,000
Retained Earnings	2,05,000
Investment in Sound Manufacturing Stock		3,06,000
Non-controlling Interest		1,44,000