15) On January 1, 2011, Klode Corporation acquired an 80% interest in Savy Company for $400,000 when Savy's stockholders' equity was $500,000; with Common stock $400,000 and Retained earnings $100,000.
On January 1, 2011, Savy purchased a 10% interest in Klode for $50,000 when Klode's total stockholders' equity was $500,000; with Common stock $400,000 and Retained earnings $100,000.
The following data was available for the year ending December 31, 2011:
Klode CompanySavy Company
Use the conventional approach to account for the mutually-held stock. Assume there were no book value/fair value differentials for each investment. The separate net incomes do not include investment income.
1. Prepare the journal entry for Klode on January 1, 2011.
2. Prepare the journal entry for Savy on January 1, 2011.
3. Prepare the journal entry to record the constructive retirement of 10% of Klode's outstanding stock due to Savy's purchase of Klode's stock.
4. Determine the incomes of Klode and Savy on a consolidated basis with mutual income for 2011 using simultaneous equations.
5. What is controlling interest share of consolidated net income and noncontrolling interest shares for 2011?