Consolidation question

  • Creator
    Topic
  • #2404719
    splash6
    Participant

    This is from Becker’s consolidated section. I’m providing a very summarized version of the question:

    Potter owns 80% of Square, so equity method. Also, this is under GAAP.

    Net income
    Potter: 240,000
    Squire: 75,000

    Dividends disbursed
    Potter: 90,000
    Squire: 20,000

    On Jan 1, Potter acquired 80% of Squire for 600,000.
    So total interest = 600,000 / .80 = 750,000
    Non-controlling interest = 750,000 * .20 = 150,000

    HOWEVER we also have to account for net income and dividends, and this is where I’m confused. Becker uses SQUIRE’S net income and dividends to arrive at the answer, which is 75,000 and 20,000 multiplied by .20 and then backed into the 150,000 already calculated to arrive at 161,000 total non-controlling interest (net income increases interest, dividends reduce it).

    WHY DO WE USE SQUIRE’S NET INCOME AND DIVIDENDS AND NOT POTTER TO GET THE ANSWER?!?

    I’ve gone through each section’s MC and Simulations 3 times now and the exam for me is this Friday, so I just don’t have the time to go back through everything again. Thanks in advance. Typically useless Becker rarely ever provides the reasoning for their answers, I DESPISE Becker.

Viewing 6 replies - 1 through 6 (of 6 total)
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    Replies
  • #2405571
    hotshot617
    Participant

    You use the subsidiary's net income and dividends because that is the entity that has a non-controlling interest. The parent company gets to report 100% of its own earnings in its consolidated financial statements.

    #2405943
    splash6
    Participant

    That's what I was thinking but I've been looking at this stuff for so long that I sometimes forget one thing I've seen 5 times already. Can't say why, what an absolute nightmare this is.

    #2406726
    hotshot617
    Participant

    You're telling me. I take FAR on Saturday. I'm missing so many practice MCQ's due to not “seeing” the questions properly…I am going to have to tell myself repeatedly in the exam to slow down.

    Nightmare is right…Good luck.

    #2409114
    Keycat
    Participant

    @Hotshot617 Don't drink too much coffee before your exam. Good luck to you.

    AUD - 77
    BEC - 83
    FAR - 81
    REG - 85
    going on
    #2409150
    splash6
    Participant

    I failed. I blew through the MC questions and the simulations killed me. When I got to the simulations, I felt like I was taking a completely different exam. I was so clueless on some of the simulations that I couldn't even guess the answer, it just plain didn't make sense. Nothing like the Becker simulations, not even related to Becker FAR material. Becker failed me again. I'm 3 for 3 with Becker.
    I had this happen to me with REG the first time. I took it the second time and then the simulations were suddenly, magically actually based on what I studied for two months, and I passed.

    Some of these exams are simply a dice roll. Like you can study all you want but you'll fail it if you get the wrong exam. It really is a dice roll, pure luck of the draw. The entire CPA machine is a pure racket. I wish the absolute worst on the people who make these exams. They deserve it. I spent 2 months studying FAR nonstop and half of the exam is like from another section. Just ridiculous.

    #2410251
    Asja
    Participant

    Hey SPlash…I read your post last night…I can't believe that happened…I'm using Wiley and your experience scares me. It might be that they making the exams harder to increase the entry barrier, maybe too many CPAs? Maybe the Ninja is just too good?

    Hope you recover quickly and maybe make a new post about your experience as it might get lost under a different topic.

    “The strongest of all warriors are these two — Time and Patience.” ― Leo Tolstoy (War and Peace)
Viewing 6 replies - 1 through 6 (of 6 total)
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