On January 1, 2014, Plate Company purchased a 90% interest in the common stock of Set Company for $650,000, an amount $20,000 in excess of the book value of equity acquired. The excess relates to the understatement of Set Company's land holdings.
Excerpts from the consolidated retained earnings section of the consolidated statements workpaper for the year ended December 31, 2014, follow:
Set Company |
Consolidated Balances |
| 1/1/14 retained earnings |
190,000 |
880,000 |
| Net income from above |
132,000 |
420,000 |
| Dividends declared |
(50,000) |
(88,000) |
| 12/31/14 retained earnings to the balance sheet |
272,000 |
1,212,000 |
Set Company's stockholders' equity is composed of common stock and retained earnings only.
Required:
Prepare the eliminating entries required for the preparation of a consolidated statements workpaper on December 31, 2014, assuming the use of the cost method.
Prepare the eliminating entries required for the preparation of a consolidated statements workpaper on December 31, 2014, assuming the use of the equity method.
Determine the total noncontrolling interest that will be reported on the consolidated balance sheet on December 31, 2014. How does the noncontrolling interest differ between the cost method and the equity method?
Can you please explain why we use the retained earnings under the set company to complete the problem instead of the retained earnings under the consolidated balances section?