Adv. Fin. Accounting - Ch. 4

What accounting treatment applies when a parent sells some of its subsidiary's shares, but nonetheless retains control over the subsidiary? (2) The sale of the subsidiary shares is considered a transaction within the consolidated entity. The parent recognizes any difference between the proceeds and the underlying carrying amount of the shares sold as an adjustment to APIC. The parent recognizes in its current year income statement either a gain or loss on the subsidiary shares sold.

The sale of the subsidiary shares is considered a transaction within the consolidated entity. The parent recognizes any difference between the proceeds and the underlying carrying amount of the shares sold as an adjustment to APIC.

When will the acquisition-date fair values of the shares owned by the controlling and non-controlling interest equal one another? (2) When the acquired subsidiary's shares are not actively traded in an exchange market. When the acquired subsidiary's shares shares are actively traded in an exchange market. When the per share price paid by the parent is representative of the acquiree's total acquisition-date fair value. When the parents acquires its shares in the subsidiary without paying a control premium.

When the per share price paid by the parent is representative of the acquiree's total acquisition-date fair value. When the parents acquires its shares in the subsidiary without paying a control premium.

Following a sale, when a parent retains only a non-controlling portion of its former subsidiary's shares, what accounting is appropriate for the retained investment? (2) A gain or loss is recognized on the revaluation of the retained investment to fair value. An adjustment to APIC is recognized on the revaluation of the retained investment to fair value. The retained investment is revalued to fair value as of the date control is lost. The carrying amount of the retained investment remains unchanged.

A gain or loss is recognized on the revaluation of the retained investment to fair value. The retained investment is revalued to fair value as of the date control is lost.

FV of NCI Less: ? = Goodwill allocated to NCI

Allocated FV of net assets to NCI

FV of Parent Less: ? = Goodwill allocated to Parent

Allocated FV of net assets to Parent

Why are two separate consolidation entries (A1 and A2) useful when the parent has paid a control premium for its controlling, but partial interest in a subsidiary? (3) Because the unamortized acquisition-date excess fair values are allocated proportionately across ownership interests. Because all goodwill must be allocated to the controlling interest when a control premium is present. Because goodwill is not allocated proportionately across the ownership interests. Because the presence of a control premium affects primarily the parent shares.

Because the unamortized acquisition-date excess fair values are allocated proportionately across ownership interests. Because goodwill is not allocated proportionately across the ownership interests. Because the presence of a control premium affects primarily the parent shares.

FV of net assets = ?

Book Value of net assets + Excess Value of net asset *The fair value of net assets is the sum of book value and excess value and each will be allocated using the same percentage of ownership.

Noncontrolling Interest: Allocating Sub's Net Income (Equation)

Consolidated Net Income xxx Less: NCI's share of Sub's Net Income adjusted for amortization of excess value (xxx) = Net Income to NCI xxx

_____________ _____________ is price higher than the market value of shares that the investor is willing to pay to obtain sufficient number of shares to obtain control of the investee's operation

Control premium

A parent paid a control premium in acquiring an 80% voting interest in a subsidiary. How is the goodwill from the combination allocated across the controlling and noncontrolling interests?

Controlling and noncontrolling interest acquisition-date fair values are compared to relative fair values of subsidiary's identifiable net assets.

Sub's acquisition date FV equation consists of:

FV of Controlling Interest (Parent) + FV of Noncontrolling Interest

True or false: Quoted prices in active markets are required to properly value the equity shares held by a noncontrolling interest.

False *Alternative valuation techniques are necessary when actively traded prices are unavailable.

Which of the following identify where noncontrolling interest amounts appear in consolidated financial statements? (2) In the consolidated owners' equity section. As an asset in the consolidated balance sheet. In the consolidated income statement as allocation of consolidated net income. As a liability in the consolidated balance sheet.

In the consolidated owners' equity section. In the consolidated income statement as allocation of consolidated net income.

This is defined as "the ownership interests in a subsidiary that are held by owners other than the parent."

Noncontrolling interests (NCI)

Company A owns a 40% equity method investment in Company B. Subsequently, Company A acquires a controlling interest in a Company B and now must prepare consolidated financial statements. If the date Company A obtains control occurs midyear, how are subsidiary revenues and expenses reported in consolidated income statement in the year of the business combination? (2) Postacquisition subsidiary revenues and expenses are excluded from consolidated revenues and expenses. Preacquisition subsidiary revenues and expenses are included in consolidated revenues and expenses. Preacquisition subsidiary revenues and expenses are excluded from consolidated revenues and expenses. Postacquisition subsidiary revenues and expenses are included in consolidated revenues and expenses.

Preacquisition subsidiary revenues and expenses are excluded from consolidated revenues and expenses. Postacquisition subsidiary revenues and expenses are included in consolidated revenues and expenses.

What impact does the presence of a control premium have on the calculation of the nontcontrolling interest?

The amount of goodwill from the combination is included disproportionately in the total noncontrolling interest.

A consolidated balance sheet reports a noncontrolling interest as

a component of owners' equity.

For an 80% owned subsidiary accounted for under the equity method, the parent includes in the Investment in Subsidiary account balance: (2) 100% of post-acquisition subsidiary earnings adjusted for excess acquisition-date fair value amortizations. a deduction for 100% of subsidiary dividends declared since acquisition. a deduction for 80% of subsidiary dividends declared since acquisition. 80% of post-acquisition subsidiary earnings adjusted for excess acquisition-date fair value amortizations.

a deduction for 80% of subsidiary dividends declared since acquisition. 80% of post-acquisition subsidiary earnings adjusted for excess acquisition-date fair value amortizations.

For financial reporting purposes, the acquisition method views a parent company and its controlled, but less than 100% owned, subsidiary as

a single economic unit.

The ___________ method requires that the sub be valued at the acquisition‐date fair value

acquisition

In periods subsequent to acquisition, noncontrolling (NCI) interest valuation in consolidated financial reports is based on

acquisition-date fair value adjusted for the NCI's share of post-acquisition adjusted subsidiary net income less dividends.

If the sale results in the loss of control, the parent recognizes...

any resulting gain or loss in its income statement.

If a _____________ _____________ occurs, the parent recognizes the entire gain on _____________ _____________. No gain is allocated to noncontrolling interest.

bargain purchase

The allocation of goodwill across the controlling and noncontrolling interests: (2) does not always result in an allocation proportional to percentage ownership interests. proceeds in a similar fashion when the business combination resulted in a bargain purchase. always results in all goodwill being allocated to the parent company. compares acquisition date total fair values to the relative (proportional) fair values of the subsidiary's identifiable net assets.

does not always result in an allocation proportional to percentage ownership interests. compares acquisition date total fair values to the relative (proportional) fair values of the subsidiary's identifiable net assets.

Consolidation Entry A adjusts subsidiary assets and liabilities for any excess acquisition-date excess fair over book values. The Consolidation Entry A adjustment to the subsidiary's assets and liabilities is net of

previous period's excess fair over book value amortizations.

Any resulting gain or loss from the remeasurement should be...

recognized in the parent's net income.

If the parent must use the fair value method after sale, the investment should be...

remeasured to fair value on the date control is lost.

Which of the following are reasons for one company to gain control over another with less than 100% ownership? (3) some outside owners of the subsidiary company may have been unwilling to sell their shares. the laws of some countries prevent complete ownership by a foreign firm. 100% ownership may result in a noncontrolling interest that seeks to control decision-making. the parent firm may not have resources sufficient to acquire all of its subsidiary shares.

some outside owners of the subsidiary company may have been unwilling to sell their shares. the laws of some countries prevent complete ownership by a foreign firm. the parent firm may not have resources sufficient to acquire all of its subsidiary shares.

If the shares do not have a market value, the fair value of the NCI could be assessed using...

the consideration transferred paid by the parent.

For most cases, the best measure of a noncontrolling interest's acquisition-date fair value is

the market price of the noncontrolling shares surrounding the date of an acquisition.

If the shares of the subsidiary have a market value, the fair value of the NCI is assessed using...

the market value of the shares held by the NCI owners.

What amounts comprise the ending balance of the noncontrolling interest reported in the stockholders' equity section of the consolidated balance sheet? (3)

the noncontrolling interest beginning of the year balance; subsidiary dividends attributable to the noncontrolling interest; net income attributable to the noncontrolling interest

True or false: When a parent sells sufficient shares in a subsidiary such that it loses control, the parent recognizes a gain or loss for the difference between the proceeds of the sale and the carrying amount of the shares sold.

True *The loss of control constitutes a remeasurement event that necessitates gain/loss recognition.

When a parent pays a control premium in a less-than-100% acquisition,

more goodwill will be allocated to the parent than to the noncontrolling interest relative to their proportionate ownership percentages.

If the parent maintains control after sale, ...

no gains or losses should be recognized in income. The "gains or losses" on sale are reported as an increase or decrease in owners' equity

When a parent acquires a controlling, but less-than-100% interest in a subsidiary, the basic elements for establishing an acquisition-date subsidiary value include (2) only the consideration transferred by the parent. the fair value of the noncontrolling interest. the subsidiary's carrying value of the noncontrolling interest. the fair value of the controlling interest.

the fair value of the noncontrolling interest. the fair value of the controlling interest.

When a parent applies the initial value method to account for its Investment in Subsidiary account, Consolidation Entry asterisk C provides which of the following adjustments to accrual accounting? (2) An adjustment to the parent's current dividends for its share of the subsidiary's current dividends. An adjustment to the parent's RE for its share of excess fair value amortizations from acquisition date to the beginning of the current period. An adjustment to the parent's current net income for its share of the subsidiary's net income. An adjustment to the parent's RE for its share of the change in subsidiary RE from acquisition date to the beginning of the current period.

An adjustment to the parent's RE for its share of excess fair value amortizations from acquisition date to the beginning of the current period. An adjustment to the parent's RE for its share of the change in subsidiary RE from acquisition date to the beginning of the current period.

What accounting treatment applies when a parent sells enough of its subsidiary's shares so that it no longer possesses control over the subsidiary?

The parent recognizes either a gain or loss on the shares sold.

Problem: Consolidation with NCI Padre, Inc., bought 80 percent of the outstanding common stock of Sierra Corporation on January 1, 2021, for $960,000 cash. At the acquisition date, Sierra's total fair value, including the noncontrolling interest, was assessed at $1,200,000 although Sierra's book value was only $690,000. Also, several individual items on Sierra's financial records had fair values that differed from their book values as follows: (see ppt. slides) Additional info. (from table): - Sierra reported $226,000 in net income in 2021 - $65,000 in dividends declared in 2021 - Retained earnings, 1/1: $530,000 - Common stock: 100,000 - Additional paid‐in capital: 60,000 - the parent's equity income in subsidiary of $117,120 - the balance of investment in Sierra of $1,085,120 Q1: Prepare the acquisition‐date fair value allocation schedule. Q2: Determine all entries made to Investment in Sierra in Padre's book during 2021. Q3: Prepare a list of consolidation entries as of December 31, 2021 Q4: Prepare a consolidation worksheet and determine the consolidated totals. (See chart)

* FV of CI = $960,000 (960K/1,200K = 80%) * FV of NCI = $240,000 (= 1,200,000 - 960,000) (240K/1,200K = 20%) *No control premium;% Sub's FV = % ownership Excess Value: $225,000 (land) - 24,000 (bldg.) + 94,000 (copyrights) + 18,400 (N/P) = $313,400 Annual amortization: Building & equipment = ($24,000)/10 years = ($2,400) Copyright = $94,000/20 years = 4,700 Notes payable = $18,400/8 years = 2,300 Annual amortization = $4,600 Q1: Acquisition date: 01/01/21 Sub's acquisition date fair value = FV of CI + FV of NCI = $960,000 + $240,000= $1,200,000 Sub's BV on 1/1 = $690,000 Excess Value on 1/1 = 313,400 Goodwill = $196,600 Allocation of goodwill: 80% to Parent = $157,280 20% to NCI = $39,320 *There is no control premium, FV of CI is 80% of the sub's fair value for 80% ownership in the sub. When there is no control premium, goodwill will be allocated in proportion of the percentage of ownership. Q2: Investment in Sierra -- 960,000 (Beg. Bal on 1/1/21) + 180,800 (Parent's share of sub's income -- 226,000 * 80%) - 52,000 (Parent's share of dividends -- 65,000 * 80%) - 3,680 (Parent's share of amortization -- 4,600 * 80%) = $1,085,120 (End Bal. on 12/31/21) Equity income = 180,800 - 3,680 = $177,120 Q3: Entry S: Dr. Common Stock (Sub) 100,000 Dr. Add. PIC (Sub) 60,000 Dr. Retained Earnings, 1/1 (Sub) 530,000 Cr. Investment 552,000 (80% * 690K) Cr. NCI 138,000 (20% * 690K) *100,000 C/S + 60,000 Add. PIC + 530,000 R/E, 1/1 = 690,000 Sub's BV on 1/1/21 Entry A1: Dr. Land 225,000 Dr. Copyright 94,000 Dr. Notes Payable 18,400 Cr. Building & Equipment 24,000 Cr. Investment 250,720 (80% * 313.4K) Cr. NCI 62,680 (20% * 313.4K) *225,000 Land + 94,000 C/R + 18,400 N/P - 24,000 Bldg./Equip. = $313,400 Sub's excess value on 1/1/21 Entry A2: Dr. Goodwill 196,600 Cr. Investment 157,280 Cr. NCI 39,320 *No control premium, allocated 80% to Parent and 20% to NCI Entry I: Dr. Equity Income 177,120 Cr. Investment 177,120 Entry D: Dr. Investment 52,000 Cr. Dividend Declared (Sub) 52,000 Entry E: Dr. Building 2,400 Cr. Depreciation Expense 2,400 Dr. Amortization Expense 4,700 Cr. Copyright 4,700 Dr. Interest Expense 2,300 Cr. Notes Payable 2,300 Q4: (see chart)

A parent company owns 80% of the voting stock of a subsidiary. In Consolidation Entry I, what percentage of the parent's balance in its Equity in Subsidiary Earnings account should be eliminated?

100%

A parent company owns 80% of the voting stock of a subsidiary. What percentage of the subsidiary's revenues and expenses are consolidated?

100%

In periods subsequent to an acquisition, how is consolidated net income generally computed in the presence of a 20% noncontrolling interest?

100% of the parent's net income plus 100% of the subsidiary's net income adjusted for excess acquisition-date fair value amortizations.

A parent company owns 80% of the voting stock of a subsidiary. What percentage of the total beginning subsidiary's stockholders' equity elimination should Consolidation Entry S allocate to the noncontrolling interest?

20%

A parent company owns 80% of the voting stock of a subsidiary. What percentage of the total excess fair value net adjustment should Consolidation Entry A allocate to the noncontrolling interest?

20%

Which of the following are included in the calculation of Pawn Company's end-of-year 20% noncontrolling interest when the parent has paid a control premium? (3) 20% of the subsidiary's beginning-of-year book value. 20% of the excess fair value allocation for the subsidiary's beginning-of-year identifiable net assets. 20% of the goodwill recognized in the business combination. Current year net income allocation to the noncontrolling interest.

20% of the subsidiary's beginning-of-year book value. 20% of the excess fair value allocation for the subsidiary's beginning-of-year identifiable net assets. Current year net income allocation to the noncontrolling interest.

A parent company owns 80% of the voting stock of a subsidiary. In Consolidation Entry D, what percentage of the subsidiary's balance in its Dividends Declared account should be eliminated?

80%

Why may noncontrolling interest shares sell at a price less than shares recently sold that transferred control to an acquirer? (2) Noncontrolling interest shares no longer carry the benefit of transferring control to a new owner. Noncontrolling interest shares are not traded after a business combination. Obtaining a controlling interest adds a valuable benefit to the acquirer.

Noncontrolling interest shares no longer carry the benefit of transferring control to a new owner. Obtaining a controlling interest adds a valuable benefit to the acquirer.

Problem: Sales of Subsidiary Shares Parker Company acquired 7,000 of the 10,000 outstanding shares of Sunder Company on January 1, 2019, for $840,000. The subsidiary's total fair value was assessed at $1,200,000 although its book value on that date was $1,130,000. The $70,000 fair value in excess of Sunder's book value was assigned to a patent with a 5‐year remaining life. On January 1, 2021, Parker reported a $1,085,000 equity method balance in the Investment in Sunder Company account. On October 1, 2021, Parker sells 1,000 shares of the investment for $191,000. During 2021, Sunder reported net income of $120,000 and declared dividends of $40,000. These amounts are assumed to have occurred evenly throughout the year. Q1: Determine the parent's share of the subsidiary's net income for 2021 prior to the sale of 1,000 shares. Q2: Determine the book value of Investment in Sub as of October 1, 2021 before the sale of 1,000 shares. Q3: Prepare a journal entry to record the sale of 1,000 shares .

* Sub's acquisition date fair value = $1,200,000 * Book value, 1.1.19 = $1,130,000 * Excess value= $70,000 * Goodwill = $0 * Patent with annual amortization of excess value = 70,000/5 years = $14,000 Q1: Sub's adjusted net income (1.1.21 to 10.1.21) = (120,000 - 14,000) * 9/12 = $79,500 Parent's share of net income (i.e., equity income) = 79,500 * 70% = $55,650 Q2: Investment in Sub.: $1,085,000 (1.1.21) + $ 63,000 (Sub's reported income (9 months)= 120,000 * 9/12 * 70%) - $ 21,000 (Sub's dividends (9 months)= 40,000*9/12*70%) - $ 7,350 (Annual amortization of excess value(9 months)= 14,000*9/12*70%) = $1,119,650 bal. on 10/1/21 *Book value of 1,000 shares sold =$1,119,650 * 1000/7000 = $159,950 *Equity income = 63,000 - 7,350 = $55,650 Q3: Dr. Cash 191,000 Cr. Investment in Sub. 159,950 Cr. Add. Paid in Capital (Parent) 31,050 *No gain recognized because Parent maintains control. Parent's APIC is credited to show an equity transfer from NCI (new buyer) to Parent. *Book value of 1,000 shares sold =$1,119,650 * (1000/7000) = $159,950

______________ is measured as FV of Controlling (Noncontrolling) on acquisition date minus allocated FV of net identifiable assets.

Goodwill

When a business acquisition resulting in control takes place midyear, how is the consolidation process affected? (3) Only post-acquisition subsidiary revenues are included in consolidated totals. Subsidiary book value must be computed as of the acquisition date. Only post-acquisition subsidiary expenses are included in consolidated totals. Current year revenues and expenses are included in consolidated net income regardless of the acquisition date.

Only post-acquisition subsidiary revenues are included in consolidated totals. Subsidiary book value must be computed as of the acquisition date. Only post-acquisition subsidiary expenses are included in consolidated totals.

The beginning balance of the noncontrolling interest (NCI) can be viewed as the NCI's ownership share multiplied by the sum of which of the following two components? (2) The acquisition-date excess fair over book value for the subsidiary. The unamortized excess acquisition-date subsidiary fair over book value as of the beginning of the period. The book value of the subsidiary as of the beginning of the period. The fair value of the subsidiary as of the beginning of the period.

The unamortized excess acquisition-date subsidiary fair over book value as of the beginning of the period. The book value of the subsidiary as of the beginning of the period.

True or false: During the current year Company A acquires additional shares of Company B stock increasing its 20% equity method investment to a 90% controlling interest. In its consolidated financial statements for the current year, Company A will report equity method income for its preacquisition ownership of Company B.

True *Subsidiary revenues and expenses are combined only for the post-acquisition period.

True or false: Consolidation Entry E does not vary depending on the controlling percentage of the subsidiary owned by the parent.

True *The acquisition method adjusts 100% of the subsidiary's assets and liabilities to their acquisition date fair value regardless of the existence of a noncontrolling interest. Subsequent to acquisition, amortization expense is recognized by Consolidation Entry E based on these adjustments.

Problem: Noncontrolling Interest and Controlling Interest On January 1, Patterson Corporation acquired 80 percent of the 100,000 outstanding voting shares of Soriano, Inc., in exchange for $31.25 per share cash. The remaining 20 percent of Soriano's shares continued to trade for $30 both before and after Patterson's acquisition. In addition, Patterson assigned a $600,000 value to certain unpatented technologies recently developed by Soriano. These technologies were estimated to have a 3‐year remaining life. On January 1, Soriano's book and fair values were as follows: (see ppt. slides) During the year, Soriano declared a $30,000 dividend for its shareholders. The companies reported the following revenues and expenses from their separate operations for the year ending December 31. Q1: What total value should Patterson assign to its Soriano acquisition on January 1? Q2: How much goodwill resulted from Patterson's acquisition of Soriano and what amounts are allocated to controlling and noncontrolling interest? Q3: For years subsequent to acquisition, how will Soriano's identifiable assets and liabilities be valued in Patterson's consolidated financial statements? Q4: What is the consolidated net income for the year and what amounts are allocated to the controlling and noncontrolling interests? Q5: What is the noncontrolling interest amount reported in the December 31 consolidated balance sheet?

* $30 -- FV of NonControlling Interest * $31.25 -- FV of Consideration Transferred = FV of Controlling Interest * Control premium = $1.25 (= 31.25 - 30) (See slide for the fair values of Soriano's net assets at the acquisition date.) *Three assets in Soriano's books had fair value that was different from their book value. *Soriano had unpatented technology that was internally developed and therefore did not have a book value. Patterson assessed this unpatented technology at $600,000 with 3 years remaining life. Therefore, ^the excess value of the unpatented technology is $600,000. *The total fair value of the net assets is $2,900,000 including $600,000 in unpatented technology. *The total excess value is $1,610,000. Revenues: $3,000,000 (Patterson); $1,400,000 (Soriano) Expenses: 1,750,000 (Patterson); 600,000 (Soriano) Book's Net Income: - Patterson: $3,000,000 - 1,750,000 = $1,250,000 - Soriano: 1,400,000 - 600,000 = $800,000 Q1: Sub's Acquisition Date Fair Value = FV of Controlling Interest + FV of NCI FV of CI/Parent = 80,000 shares * $31.25 = $2,500,000 FV of NCI = 20,000 shares * $30 = 600,000 2,500,000 + 600,000 = $3,100,000 Q2: Sub's Acquisition Date Fair Value = $3,100,000 FV of Sub's Net Assets = $2,900,000 (BV + Excess) Goodwill = 3,100,000 - 2,900,000 = $200,000 Allocation of Goodwill: Sub's acquisition date FV (total) = $3,100,000 - CI (80% * 3,100,000) = $2,500,000 - NCI (20% * $3,100,000) = $600,000 Less: FV of Sub's Net Assets = $2,900,000 - CI (80% * $2,900,000) = $2,320,000 - NCI (20% * $2,900,000) = 580,000 Goodwill: Total: $3,100,000 - $2,900,000 = 200,000 CI: $2,500,000 - $2,320,000 = $180,000 (90%) NCI: $600,000 - $ 580,000 = 20,000 (10%) *Goodwill allocation does not follow the % of ownership when there is control premium; Since the parent paid more for its ownership in the subsidiary, $31.25 instead of $30 per share, greater proportion of the goodwill amount would be assigned to the parent. Q3: The value of Soriano's assets and liabilities will be presented at their whole amount as follows: BV on the consolidation date: (+) Excess value as of the acquisition date (‐) Amortization of the excess value to date (from acquisition to consolidation date) *The amount presented is calculated as the book value of the asset or liability plus its excess value as of the acquisition date minus the amortization of this excess value to date. The calculation is the same as that in the case of 100% of ownership by the parent. Q4: Annual amortization of excess value: - Building and equipment = (250,000)/5 years = $ (50,000) - Trademarks = 200,000/10 years = 20,000 - Patented tech = 1,060,000/4 years = 265,000 - Unpatented tech = 600,000/3 years = 200,000 Annual amortization = $435,000 Parent's book net income $1,250,000 Sub's book net income 800,000 (‐) Add. depreciation/amortization expense from the amortization of excess value (435,000) = Consolidated net income $1,615,000 less: NCI's share of Sub's net income = 20% * (800,000 - 435,000) = 73,000 = Parent's share of consolidated net income $1,542,000 Q5: Beginning balance of NCI, 1/1: $600,000 (+) NCI's share of Sub's net income: 73,000 (‐) NCI's share of Sub's dividends: (6,000) (30,000 * 20%) Ending balance of NCI, 12/31: $667,000 (credit balance)

The Equity Method: How do consolidation entries change in the presence of noncontrolling interest in the subsidiary? 1) ENTRY S 2) ENTRY A 3) ENTRY I 4) ENTRY D 5) ENTRY E

1) Entry S eliminates the sub's Stockholders' equity account beginning balances and the book value component of the parent's investment account and recognizes noncontrolling interest. Dr. Common Stock (Sub) - XXX Dr. Additional Paid‐in Capital (Sub) - XXX Dr. Retained Earnings (Sub), Beg. Balance - XXX Cr. Investment in Sub - % BV Cr. Noncontrolling interest in Sub - % BV 2) Entry A adjusts the sub's BV to FV based on the unamortized balances of the fair‐value Allocations as of the beginning of the current year and allocates the balances to noncontrolling interest. Entry A1: Dr. Asset 1 - XXX Dr. Asset 2 - XXX Cr. Investment in Sub - % Excess Cr. Noncontrolling interest in Sub - % Excess Entry A2: Dr. Goodwill - XXX Cr. Investment in Sub - XXX Cr. Noncontrolling interest in Sub - XXX (Goodwill is proportionately allocated unless there is a control premium.) 3) Entry I eliminates the subsidiary's Income accrued by the parent. (same as the entry made when the parent owns 100% of the subsidiary; but, be sure to check the balance of Equity Income in the parent's book and use this balance to close the equity income) Dr. Equity Income - XXX Cr. Investment in Sub - XXX 4) Entry D eliminates the subsidiary's Dividends to the parent. (the same as the entry made when the parent owns 100% of the subsidiary, but be sure to eliminate only the parent's share of the subsidiary's dividend.) Investment in Sub XXX Dividend Declared XXX 5) Entry E recognizes depreciation/amortization Expenses of the acquisition date excess value - This entry includes the full amount of excess fair‐value amortizations. No allocations to controlling and noncontrolling interests are made.