Cinema Company acquired 70 percent of Movie Corporation's shares on December 31, 20X5, at underlying book value of $98,000. At that date, the fair value of the noncontrolling interest was equal to 30 percent of the book value of Movie Corporation. Movie's balance sheet on January 1, 20X8, contained the following balances:
On January 1, 20X8, Movie acquired 5,000 of its own $2 par value common shares from Nonaffiliated Corporation for $6 per share.

-Based on the preceding information,what is the increase in the book value of the equity attributable to the parent as a result of the repurchase of shares by Movie Corporation?

Question

Cinema Company acquired 70 percent of Movie Corporation's shares on December 31, 20X5, at underlying book value of $98,000. At that date, the fair value of the noncontrolling interest was equal to 30 percent of the book value of Movie Corporation. Movie's balance sheet on January 1, 20X8, contained the following balances:
On January 1, 20X8, Movie acquired 5,000 of its own $2 par value common shares from Nonaffiliated Corporation for $6 per share.
 
-Based on the preceding information,what is the increase in the book value of the equity attributable to the parent as a result of the repurchase of shares by Movie Corporation?

Quizplus · Accepted Answer

First, we need to calculate the book value of Movie Corporation's equity attributable to the parent as of January 1, 20X8. 
70% x (total equity - noncontrolling interest) = 70% x (($166,250 + $4,000) - 30% x $166,250) = $102,000

Next, we need to calculate the book value per share: 
($166,250 + $4,000) / 10,000 = $17.25 per share

Finally, we can calculate the increase in book value of equity attributable to the parent from the repurchase of shares: 
5,000 shares x ($6 selling price - $17.25 book value per share) = -$57,500 
Since the repurchase resulted in a decrease in equity, the increase in book value attributable to the parent will be negative. 
$57,500 x 70% = -$40,250 
Therefore, the increase in book value of equity attributable to the parent is $6,125 ($40,250 decrease from the repurchase + $46,375 initial book value).

Cinema Company Acquired 70 Percent of Movie Corporation's Shares on December