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securities at the carrying amount of $105,000 and are the only investment securities of the consolidated group. [FAS 164, paragraph B7, sequence 256.2.4]

  • c.

    The sale of Subsidiary A’s shares is accounted for as an equity transaction (within unrestricted net assets) in the consolidated financial statements of Hospital A, as follows: [FAS 164, paragraph B7, sequence 256.2.5]

    • 1.

      A noncontrolling interest is recognized in unrestricted net assets in the amount of $41,000 ($205,000 × 20 percent). [FAS 164, paragraph B7, sequence 256.2.5.1]

    • 2.

      Unrestricted net assets attributable to Hospital A are increased by $9,000, calculated as the difference between the cash received ($50,000) and the carrying amount of the noncontrolling interest ($41,000). [FAS 164, paragraph B7, sequence 256.2.5.2]

    • 3.

      The top-level (consolidated) journal entry to record the sale of Subsidiary A’s shares to the noncontrolling shareholder is as follows: [FAS 164, paragraph B7, sequence 256.2.3]

Cash $ 50,000

Unrestricted net assets (noncontrolling interest) Unrestricted net assets (Hospital A)

$ 41,000 9,000

[FAS 164, paragraph B7, sequence 256.2.5.3.1]

d.

For the year ended December 31, 20X2, the amount of Subsidiary A’s net income included in the consolidated financial statements is $20,000, which included a net loss for discontinued operations of $7,000. [FAS 164, paragraph B7, sequence 256.2.5.4]

958-810-55-22 The following assumptions are applicable to 20X3: [FAS 164, paragraph B7, sequence 256.3.1]

a.

On January 1, 20X3, Hospital A purchases 1,000 shares in Subsidiary A from the noncontrolling shareholders (50 percent of the noncontrolling interest) for $30,000 cash, increasing its ownership interest from 80 percent to 90 percent. Immediately before that purchase, the carrying amount of the noncontrolling interest in Subsidiary A was $48,000. The purchase of shares from the noncontrolling shareholders is accounted for as an equity transaction in the consolidated financial statements, as follows: [FAS 164, paragraph B7, sequence 256.3.2]

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