Consolidated FS
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Transcript of Consolidated FS
Consolidated Financial Statements• prepared from separate financial
statements of acquiring (parent) and acquired (subsidiaries) companies using consolidation worksheet procedure
• present assets and liabilities of two companies as if they were single accounting entity
• required whenever stock held by acquiring company gives it controlling interest in acquired company
Controlling Interest• when one company owns, directly or
indirectly, over 50% of outstanding voting shares of another company
• gives parent company ability to establish subsidiary’s operating and financial policies and to direct subsidiary’s economic activities as if they were the economic activities of one of their branches or divisions
Direct vs. Indirect Ownership
Company A Company A
Company Y
Company Z
Direct Ownership of Co. Z by Co. A
owns shares in owns shares in
owns shares in
Indirect Ownership of Co. Z by Co. A
Company Z
Noncontrolling Interest
• any voting shares of acquired company that acquiring company does not purchase
• holders of such shares called noncontrolling interest
• consolidation procedure necessary to produce consolidated financial statements
Criteria for ConsolidationPercentage of Outstanding Voting Stock Acquired
20% 50% 100%0%
1. Level of economic influence
Nominal “Significant influence” Control
2. Financial statement presentation
Investment AccountSeparate Financial Statements
ConsolidatedFinancial Statements
Exceptions to > 50% Consolidation Rules
• not required when control is likely to be temporary – parent anticipates selling subsidiary’s stock to reduce
ownership below 50%
• not required when control does not rest with majority stockholders – subsidiary involved in bankruptcy is controlled by court-
appointed trustee
– subsidiary located outside United States and availability of assets and net income restricted by foreign governments
Consolidation Procedure• required whenever business combination by
acquisition of stock results in an investment in stock account on records of acquiring company (Type III and IV business combinations)
• never required when business combinations by acquisition of net assets (Type I and II business combinations)
• not required when business combination by acquisition of stock and stock of acquired company liquidated
Diagram for Analysis of Valuation Differential
for Purchase Combination
AcquisitionCost
Fair Value ofIdentifiable NetAssets Acquired
Book Value of Net Assets
Acquired
GoodwillRevaluationIncrement
Valuation Differential
X%
Owned X%
Owned
Steps in Consolidation Worksheet Procedure at Date of AcquisitionWithout Noncontrolling Interest
• enter separate balance sheets of parent and subsidiary
• prepare consolidation worksheet adjustments– eliminate subsidiary owners’ equity (1a)
– recognize revaluation increments and decrements (1b)
– recognize goodwill (1c)
• complete consolidated column• prepare consolidated balance sheet from worksheet
On January 1, 20X1, P Company purchased all of the common stock of S Company for $150,000. The balance sheets of both companies immediately after the acquisition on January 1, 20X1 are presented below:
P Company S Company Assets
Cash $ 33,500 $ 10,000 Accounts receivable, net 100,000 27,500 Inventory 175,000 40,000 Investment in S Co. 150,000 Land 200,000 35,000 Building and equipment, net 325,000 80,000 Patent 7,500 Total assets $ 983,500 $200,000
Liabilities and Stockholders’ Equity Accounts payable $ 125,000 $ 26,925 Bonds payable, net 483,500 78,075 Common stock ($30 par value) 150,000 50,000 Retained earnings 225,000 45,000 Total liabilities and Stockholders’ Equity $ 983,500 $200,000
Selected information on S Company as of January 1, 20X1 follows:
Current Value Book Value Remaining Life Inventory $42,500 $40,000 1 year Land 50,000 35,000 Indefinite Equipment 45,000 20,000 10 years Patent -0- 7,500 3 years
Steps in Consolidation Worksheet Procedure at Date of Acquisition
• enter separate balance sheets of parent and subsidiary
• prepare consolidation worksheet adjustments– eliminate subsidiary owners’ equity (1a)
– recognize revaluation increments and decrements (1b)
– recognize goodwill (1c)
• complete consolidated column• prepare consolidated balance sheet from worksheet
Separate Consolidation Adjustments ConsolidatedFinancial Statements 100% Financial
P Company S Company Ref. Dr. Ref. Cr. StatementsAssets
Cash 33,500 10,000 43,500 Accounts receivable 100,000 27,500 (1b) (1b) 127,500 Inventory 175,000 40,000 (1b) (1b) 215,000 Investment in S Co. 150,000 (1a) 150,000
(1b)(1c)
Land 200,000 35,000 (1b) (1b) 235,000 Building & equip., net 325,000 80,000 (1b) (1b) 405,000 Patent 7,500 (1b) (1b) 7,500 Goodwill (1c) - Total assets 983,500 200,000 1,183,500
Liabilities & S.E.Accounts payable 125,000 26,925 (1b) (1b) 151,925 Bonds payable, net 483,500 78,075 561,575 Common stock: P Company 150,000 150,000 S Company 50,000 (1a) 50,000 Retained earnings: P Company 225,000 225,000 S Company 45,000 (1a) 45,000 Total liab. & SE 983,500 200,000 - - 1,183,500
- - - -
Steps in Consolidation Worksheet Procedure at Date of Acquisition
• enter separate balance sheets of parent and subsidiary
• prepare consolidation worksheet adjustments– eliminate subsidiary owners’ equity (1a)
– recognize revaluation increments and decrements (1b)
– recognize goodwill (1c)
• complete consolidated column• prepare consolidated balance sheet from worksheet
Standard Consolidation Worksheet Adjustments at Date of Acquisition
1a) Common stock of subsidiary * % owned X,XXX Paid-in capital of subsidiary * % owned X,XXX Retained earnings of subsidiary * % owned X,XXX Investment in subsidiary X,XXX to eliminate parent’s share of owners’ equity of subsidiary 1b) Various asset and liability accounts * % owned X,XXX Various asset and liability accounts * % owned X,XXX Investment in subsidiary X,XXX to recognize parent’s share of revaluation increments and decrements 1c) Goodwill X,XXX Investment in subsidiary X,XXX to recognize goodwill
Steps in Consolidation Worksheet Procedure at Date of Acquisition
• enter separate balance sheets of parent and subsidiary
• prepare consolidation worksheet adjustments– eliminate subsidiary owners’ equity (1a)
– recognize revaluation increments and decrements (1b)
– recognize goodwill (1c)
• complete consolidated column• prepare consolidated balance sheet from worksheet
Standard Consolidation Worksheet Adjustments at Date of Acquisition
1a) Common stock of subsidiary * % owned X,XXX Paid-in capital of subsidiary * % owned X,XXX Retained earnings of subsidiary * % owned X,XXX Investment in subsidiary X,XXX to eliminate parent’s share of owners’ equity of subsidiary
Separate Consolidation Adjustments ConsolidatedFinancial Statements 100% Financial Should
P Company S Company Ref. Dr. Ref. Cr. Statements BeAssets
Cash 33,500 10,000 43,500 Accounts receivable 100,000 27,500 (1b) (1b) 127,500 Inventory 175,000 40,000 (1b) (1b) 215,000 Investment in S Co. 150,000 (1a) 150,000 0
(1b)(1c)
Land 200,000 35,000 (1b) (1b) 235,000 Building & equip., net 325,000 80,000 (1b) (1b) 405,000 Patent 7,500 (1b) (1b) 7,500 Goodwill (1c) - Total assets 983,500 200,000 1,183,500
Liabilities & S.E.Accounts payable 125,000 26,925 (1b) (1b) 151,925 Bonds payable, net 483,500 78,075 561,575 Common stock: P Company 150,000 150,000 S Company 50,000 (1a) 50,000 0Retained earnings: P Company 225,000 225,000 S Company 45,000 (1a) 45,000 0Total liab. & SE 983,500 200,000 - - 1,183,500
- - - -
Separate Consolidation Adjustments ConsolidatedFinancial Statements 100% Financial Should
P Company S Company Ref. Dr. Ref. Cr. Statements BeAssets
Cash 33,500 10,000 43,500 Accounts receivable 100,000 27,500 (1b) (1b) 127,500 Inventory 175,000 40,000 (1b) (1b) 215,000 Investment in S Co. 150,000 (1a) 150,000 0
(1b)(1c)
Land 200,000 35,000 (1b) (1b) 235,000 Building & equip., net 325,000 80,000 (1b) (1b) 405,000 Patent 7,500 (1b) (1b) 7,500 Goodwill (1c) - Total assets 983,500 200,000 1,183,500
Liabilities & S.E.Accounts payable 125,000 26,925 (1b) (1b) 151,925 Bonds payable, net 483,500 78,075 561,575 Common stock: P Company 150,000 150,000 S Company 50,000 (1a) 50,000 0Retained earnings: P Company 225,000 225,000 S Company 45,000 (1a) 45,000 0Total liab. & SE 983,500 200,000 - - 1,183,500
- - - -
Separate Consolidation Adjustments ConsolidatedFinancial Statements 100% Financial Should
P Company S Company Ref. Dr. Ref. Cr. Statements BeAssets
Cash 33,500 10,000 43,500 Accounts receivable 100,000 27,500 (1b) (1b) 127,500 Inventory 175,000 40,000 (1b) (1b) 215,000 Investment in S Co. 150,000 (1a) 150,000 0
(1b)(1c)
Land 200,000 35,000 (1b) (1b) 235,000 Building & equip., net 325,000 80,000 (1b) (1b) 405,000 Patent 7,500 (1b) (1b) 7,500 Goodwill (1c) - Total assets 983,500 200,000 1,183,500
Liabilities & S.E.Accounts payable 125,000 26,925 (1b) (1b) 151,925 Bonds payable, net 483,500 78,075 561,575 Common stock: P Company 150,000 150,000 S Company 50,000 (1a) 50,000 - 0Retained earnings: P Company 225,000 225,000 S Company 45,000 (1a) 45,000 0Total liab. & SE 983,500 200,000 50,000 - 1,133,500
- - 50,000 50,000
Separate Consolidation Adjustments ConsolidatedFinancial Statements 100% Financial Should
P Company S Company Ref. Dr. Ref. Cr. Statements BeAssets
Cash 33,500 10,000 43,500 Accounts receivable 100,000 27,500 (1b) (1b) 127,500 Inventory 175,000 40,000 (1b) (1b) 215,000 Investment in S Company 150,000 (1a) 150,000 0
(1b)(1c)
Land 200,000 35,000 (1b) (1b) 235,000 Building & equip., net 325,000 80,000 (1b) (1b) 405,000 Patent 7,500 (1b) (1b) 7,500 Goodwill (1c) - Total assets 983,500 200,000 1,183,500
Liabilities & S.E.Accounts payable 125,000 26,925 (1b) (1b) 151,925 Bonds payable, net 483,500 78,075 561,575 Common stock: P Company 150,000 150,000 S Company 50,000 (1a) 50,000 - 0Retained earnings: P Company 225,000 225,000 S Company 45,000 (1a) 45,000 - 0Total liab. & SE 983,500 200,000 95,000 - 1,088,500
- - 95,000 95,000
Separate Consolidation Adjustments ConsolidatedFinancial Statements 100% Financial Should
P Co. S Co. Ref. Dr. Ref. Cr. Statements BeAssets
Cash 33,500 10,000 43,500 Accounts receivable 100,000 27,500 (1b) (1b) 127,500 Inventory 175,000 40,000 (1b) (1b) 215,000 Investment in S Co. 150,000 (1a) 95,000 55,000 0
(1b)(1c)
Land 200,000 35,000 (1b) (1b) 235,000 Building & equip., net 325,000 80,000 (1b) (1b) 405,000 Patent 7,500 (1b) (1b) 7,500 Goodwill (1c) - Total assets 983,500 200,000 1,088,500
Liabilities & S.E.Accounts payable 125,000 26,925 (1b) (1b) 151,925 Bonds payable, net 483,500 78,075 561,575 Common stock: P Company 150,000 150,000 S Company 50,000 (1a) 50,000 - 0Retained earnings: P Company 225,000 225,000 S Company 45,000 (1a) 45,000 - 0Total liab. & SE 983,500 200,000 95,000 95,000 1,088,500
- - - -
P Company and Consolidated Subsidiary
Supporting Calculations – 1/1/X1 1a) $50,000 * 100% = $50,000 (P’s Share of S’s Common Stock)
$45,000 * 100% = $45,000 (P’s Share of S’s Beg. Retained Earnings)
Steps in Consolidation Worksheet Procedure at Date of Acquisition
• enter separate balance sheets of parent and subsidiary
• prepare consolidation worksheet adjustments– eliminate subsidiary owners’ equity (1a)
– recognize revaluation increments and decrements (1b)
– recognize goodwill (1c)
• complete consolidated column• prepare consolidated balance sheet from worksheet
P Company and Consolidated Subsidiary
Supporting Calculations – 1/1/X1 Revaluation increment (decrement) on date of acquisition (DOA) =
(FV of identifiable net assets on DOA – BV of identifiable net assets on DOA) * % owned
1b) ($42,500 - $40,000) * 100% = $2,500 (P's Share of S’s Inventory Revaluation Increment at Date of Acquisition)
($50,000 - $35,000) * 100% = $15,000 (P's Share of S’s Land Revaluation Increment at Date of Acquisition)
($45,000 - $20,000) * 100% = $25,000 (P's Share of S’s Equipment Revaluation Increment at Date of Acquisition)
($-0- - $7,500) * 100% = ($7,500) (P's Share of S’s Patent Revaluation Decrement at Date of Acquisition)
AC FMV * % BV * %
GW RI(D)=2,500+15,000+25,000-7,500=35,000
150,000 130,000 = 95,000+35,000 95,000 = (50,000+45,000)*100%
Standard Consolidation Worksheet Adjustments at Date of Acquisition
1b) Various asset and liability accounts * % owned X,XXX Various asset and liability accounts * % owned X,XXX Investment in subsidiary X,XXX to recognize parent’s share of revaluation increments and decrements
Separate Consolidation Adjustments ConsolidatedFinancial Statements 100% Financial Should
P Co. S Co. Ref. Dr. Ref. Cr. Statements BeAssets
Cash 33,500 10,000 43,500 Accounts receivable 100,000 27,500 (1b) (1b) 127,500 Inventory 175,000 40,000 (1b) (1b) 215,000 Investment in S Co. 150,000 (1a) 95,000 55,000 0
(1b)(1c)
Land 200,000 35,000 (1b) (1b) 235,000 Building & equip., net 325,000 80,000 (1b) (1b) 405,000 Patent 7,500 (1b) (1b) 7,500 Goodwill (1c) - Total assets 983,500 200,000 1,088,500
Liabilities & S.E.Accounts payable 125,000 26,925 (1b) (1b) 151,925 Bonds payable, net 483,500 78,075 561,575 Common stock: P Company 150,000 150,000 S Company 50,000 (1a) 50,000 - 0Retained earnings: P Company 225,000 225,000 S Company 45,000 (1a) 45,000 - 0Total liab. & SE 983,500 200,000 95,000 95,000 1,088,500
- - - -
Separate Consolidation Adjustments ConsolFinancial Statements 100% Financial Should
P Co. S Co. Ref. Dr. Ref. Cr. Statements BeAssets
Cash 33,500 10,000 43,500 Accounts receivable 100,000 27,500 (1b) (1b) 127,500 Inventory 175,000 40,000 (1b) 2,500 (1b) 217,500 Investment in S Co. 150,000 (1a) 95,000 55,000 0
(1b)(1c)
Land 200,000 35,000 (1b) 15,000 (1b) 250,000 Building & equip., net 325,000 80,000 (1b) 25,000 (1b) 430,000 Patent 7,500 (1b) (1b) 7,500 - Goodwill (1c) - Total assets 983,500 200,000 1,123,500
Liabilities & S.E.Accounts payable 125,000 26,925 (1b) (1b) 151,925 Bonds payable, net 483,500 78,075 561,575 Common stock: P Company 150,000 150,000 S Company 50,000 (1a) 50,000 - 0Retained earnings: P Company 225,000 225,000 S Company 45,000 (1a) 45,000 - 0Total liab. & SE 983,500 200,000 137,500 102,500 1,088,500
- - 35,000 35,000
Separate Consolidation Adjustments ConsolFinancial Statements 100% Financial Should
P Co. S Co. Ref. Dr. Ref. Cr. Statements BeAssets
Cash 33,500 10,000 43,500 Accounts receivable 100,000 27,500 (1b) (1b) 127,500 Inventory 175,000 40,000 (1b) 2,500 (1b) 217,500 Investment in S Co. 150,000 (1a) 95,000 20,000 0
(1b) 35,000 (1c)
Land 200,000 35,000 (1b) 15,000 (1b) 250,000 Building & equip., net 325,000 80,000 (1b) 25,000 (1b) 430,000 Patent 7,500 (1b) (1b) 7,500 - Goodwill (1c) - Total assets 983,500 200,000 1,088,500
Liabilities & S.E.Accounts payable 125,000 26,925 (1b) (1b) 151,925 Bonds payable, net 483,500 78,075 561,575 Common stock: P Company 150,000 150,000 S Company 50,000 (1a) 50,000 - 0Retained earnings: P Company 225,000 225,000 S Company 45,000 (1a) 45,000 - 0Total liab. & SE 983,500 200,000 137,500 137,500 1,088,500
- - - -
Steps in Consolidation Worksheet Procedure at Date of Acquisition
• enter separate balance sheets of parent and subsidiary
• prepare consolidation worksheet adjustments– eliminate subsidiary owners’ equity (1a)
– recognize revaluation increments and decrements (1b)
– recognize goodwill (1c)
• complete consolidated column• prepare consolidated balance sheet from worksheet
P Company and Consolidated Subsidiary
Supporting Calculations – 1/1/X1 1c) AC FMV * % BV * %
GW=150,000–130,000 = 20,000RI(D)=2,500+15,000+25,000-7,500=35,000
150,000 130,000 = 95,000+35,000 95,000 = (50,000+45,000)*100%
$20,000 (Goodwill at Date of Acquisition)
Standard Consolidation Worksheet Adjustments at Date of Acquisition
1c) Goodwill X,XXX Investment in subsidiary X,XXX to recognize goodwill
Separate Consolidation Adjustments ConsolidatedFinancial Statements 100% Financial Should
P Co. S Co. Ref. Dr. Ref. Cr. Statements BeAssets
Cash 33,500 10,000 43,500 Accounts receivable 100,000 27,500 (1b) (1b) 127,500 Inventory 175,000 40,000 (1b) 2,500 (1b) 217,500 Investment in S Co. 150,000 (1a) 95,000 20,000 0
(1b) 35,000 (1c)
Land 200,000 35,000 (1b) 15,000 (1b) 250,000 Building & equip., net 325,000 80,000 (1b) 25,000 (1b) 430,000 Patent 7,500 (1b) (1b) 7,500 - Goodwill (1c) 20,000 20,000 Total assets 983,500 200,000 1,108,500
Liabilities & S.E.Accounts payable 125,000 26,925 (1b) (1b) 151,925 Bonds payable, net 483,500 78,075 561,575 Common stock: P Company 150,000 150,000 S Company 50,000 (1a) 50,000 - 0Retained earnings: P Company 225,000 225,000 S Company 45,000 (1a) 45,000 - 0Total liab. & SE 983,500 200,000 157,500 137,500 1,088,500
- - 20,000 20,000
Separate Consolidation Adjustments ConsolidatedFinancial Statements 100% Financial Should
P Co. S Co. Ref. Dr. Ref. Cr. Statements BeAssets
Cash 33,500 10,000 43,500 Accounts receivable 100,000 27,500 (1b) (1b) 127,500 Inventory 175,000 40,000 (1b) 2,500 (1b) 217,500 Investment in S Co. 150,000 (1a) 95,000 - 0
(1b) 35,000 (1c) 20,000
Land 200,000 35,000 (1b) 15,000 (1b) 250,000 Building & equip., net 325,000 80,000 (1b) 25,000 (1b) 430,000 Patent 7,500 (1b) (1b) 7,500 - Goodwill (1c) 20,000 20,000 Total assets 983,500 200,000 1,088,500
Liabilities & S.E.Accounts payable 125,000 26,925 (1b) (1b) 151,925 Bonds payable, net 483,500 78,075 561,575 Common stock: P Company 150,000 150,000 S Company 50,000 (1a) 50,000 - 0Retained earnings: P Company 225,000 225,000 S Company 45,000 (1a) 45,000 - 0Total liab. & SE 983,500 200,000 157,500 157,500 1,088,500
- - - -
Separate Consolidation Adjustments ConsolidatedFinancial Statements 100% Financial Should
P Co. S Co. Ref. Dr. Ref. Cr. Statements BeAssets
Cash 33,500 10,000 43,500 Accounts receivable 100,000 27,500 (1b) (1b) 127,500 Inventory 175,000 40,000 (1b) 2,500 (1b) 217,500 Investment in S Co. 150,000 (1a) 95,000 - 0
(1b) 35,000 (1c) 20,000
Land 200,000 35,000 (1b) 15,000 (1b) 250,000 Building & equip., net 325,000 80,000 (1b) 25,000 (1b) 430,000 Patent 7,500 (1b) (1b) 7,500 - Goodwill (1c) 20,000 20,000 Total assets 983,500 200,000 1,088,500
Liabilities & S.E.Accounts payable 125,000 26,925 (1b) (1b) 151,925 Bonds payable, net 483,500 78,075 561,575 Common stock: P Company 150,000 150,000 S Company 50,000 (1a) 50,000 - 0Retained earnings: P Company 225,000 225,000 S Company 45,000 (1a) 45,000 - 0Total liab. & SE 983,500 200,000 157,500 157,500 1,088,500
- - - -
• enter separate balance sheets of parent and subsidiary
• prepare consolidation worksheet adjustments– eliminate subsidiary owners’ equity (1a)
– recognize revaluation increments and decrements (1b)
– recognize goodwill (1c)
• complete minority interest column• complete consolidated column• prepare consolidated balance sheet from worksheet
Steps in Consolidation Worksheet Procedure at Date of Acquisition
With Noncontrolling Interest
On January 1, 20X1, P Company purchased 80% of the common stock of S Company. The balance sheets of both companies immediately after the acquisition on January 1, 20X1 are presented below:
P Company S Company Assets
Cash $ 63,500 $ 10,000 Accounts receivable, net 100,000 27,500 Inventory 175,000 40,000 Investment in S Co. 120,000 Land 200,000 35,000 Building and equipment, net 325,000 80,000 Patent 7,500 Total assets $ 983,500 $200,000
Liabilities and Stockholders’ Equity Accounts payable $ 125,000 $ 26,925 Bonds payable, net 483,500 78,075 Common stock ($30 par value) 150,000 50,000 Retained earnings 225,000 45,000 Total liabilities and Stockholders’ Equity $ 983,500 $200,000
Selected information on S Company as of January 1, 20X1 follows:
Current Value Book Value Remaining Life Inventory $42,500 $40,000 1 year Land 50,000 35,000 Indefinite Equipment 45,000 20,000 10 years Patent -0- 7,500 3 years
Separate Consolidation Adjustments 20% ConsolidatedFinancial Statements 80% Minority Financial
P Co. S Co. Ref. Dr. Ref. Cr. Interest StatementsAssets Dr (Cr)
Cash 63,500 10,000 73,500 Accounts receivable 100,000 27,500 (1b) (1b) 127,500 Inventory 175,000 40,000 (1b) (1b) 215,000 Investment in S Co. 120,000 (1a) 120,000
(1b)(1c)
Land 200,000 35,000 (1b) (1b) 235,000 Building & equip., net 325,000 80,000 (1b) (1b) 405,000 Patent 7,500 (1b) (1b) 7,500 Goodwill (1c) - Total assets 983,500 200,000 1,183,500
Liabilities & S.E.Accounts payable 125,000 26,925 (1b) (1b) 151,925 Bonds payable, net 483,500 78,075 561,575 Common stock: P Company 150,000 150,000 S Company 50,000 (1a) 50,000 Retained earnings: P Company 225,000 225,000 S Company 45,000 (1a) 45,000 Minority interest - - Total liab. & SE 983,500 200,000 - - - 1,183,500
- - - -
Standard Consolidation Worksheet Adjustments at Date of Acquisition
1a) Common stock of subsidiary * % owned X,XXX Paid-in capital of subsidiary * % owned X,XXX Retained earnings of subsidiary * % owned X,XXX Investment in subsidiary X,XXX to eliminate parent’s share of owners’ equity of subsidiary 1b) Various asset and liability accounts * % owned X,XXX Various asset and liability accounts * % owned X,XXX Investment in subsidiary X,XXX to recognize parent’s share of revaluation increments and decrements 1c) Goodwill X,XXX Investment in subsidiary X,XXX to recognize goodwill
Separate Consolidation Adjustments 20% Consol.Financial Statements 80% Minority Financial Should
P Co. S Co. Ref. Dr. Ref. Cr. Interest State BeAssets
Cash 63,500 10,000 73,500 Accounts receivable 100,000 27,500 (1b) (1b) 127,500 Inventory 175,000 40,000 (1b) (1b) 215,000 Investment in S Co. 120,000 (1a) 120,000 0
(1b)(1c)
Land 200,000 35,000 (1b) (1b) 235,000 Building & equip., net 325,000 80,000 (1b) (1b) 405,000 Patent 7,500 (1b) (1b) 7,500 Goodwill (1c) - Total assets 983,500 200,000 1,183,500
Liabilities & S.E.Accounts payable 125,000 26,925 (1b) (1b) 151,925 Bonds payable, net 483,500 78,075 561,575 Common stock: P Company 150,000 150,000 S Company 50,000 (1a) 50,000 0Retained earnings: P Company 225,000 225,000 S Company 45,000 (1a) 45,000 0Minority interest - - Total liab. & SE 983,500 200,000 - - - 1,183,500
- - - - 0
Standard Consolidation Worksheet Adjustments at Date of Acquisition
1a) Common stock of subsidiary * % owned X,XXX Paid-in capital of subsidiary * % owned X,XXX Retained earnings of subsidiary * % owned X,XXX Investment in subsidiary X,XXX to eliminate parent’s share of owners’ equity of subsidiary
Separate Consolidation Adjustments 20% Consol.Financial Statements 80% Minority Financial Should
P Co. S Co. Ref. Dr. Ref. Cr. Interest State BeAssets
Cash 63,500 10,000 73,500 Accounts receivable 100,000 27,500 (1b) (1b) 127,500 Inventory 175,000 40,000 (1b) (1b) 215,000 Investment in S Co. 120,000 (1a) 120,000 0
(1b)(1c)
Land 200,000 35,000 (1b) (1b) 235,000 Building & equip., net 325,000 80,000 (1b) (1b) 405,000 Patent 7,500 (1b) (1b) 7,500 Goodwill (1c) - Total assets 983,500 200,000 1,183,500
Liabilities & S.E.Accounts payable 125,000 26,925 (1b) (1b) 151,925 Bonds payable, net 483,500 78,075 561,575 Common stock: P Company 150,000 150,000 S Company 50,000 (1a) 50,000 0Retained earnings: P Company 225,000 225,000 S Company 45,000 (1a) 45,000 0Minority interest - - Total liab. & SE 983,500 200,000 - - - 1,183,500
- - - - 0
Separate Consolidation Adjustments 20% Consol.Financial Statements 80% Minority Financial Should
P Co. S Co. Ref. Dr. Ref. Cr. Interest State BeAssets
Cash 63,500 10,000 73,500 Accounts receivable 100,000 27,500 (1b) (1b) 127,500 Inventory 175,000 40,000 (1b) (1b) 215,000 Investment in S Co. 120,000 (1a) 120,000 0
(1b)(1c)
Land 200,000 35,000 (1b) (1b) 235,000 Building & equip., net 325,000 80,000 (1b) (1b) 405,000 Patent 7,500 (1b) (1b) 7,500 Goodwill (1c) - Total assets 983,500 200,000 1,183,500
Liabilities & S.E.Accounts payable 125,000 26,925 (1b) (1b) 151,925 Bonds payable, net 483,500 78,075 561,575 Common stock: P Company 150,000 150,000 S Company 50,000 (1a) 40,000 10,000 - 0Retained earnings: P Company 225,000 225,000 S Company 45,000 (1a) 45,000 0Minority interest (10,000) 10,000 Total liab. & SE 983,500 200,000 40,000 - - 1,143,500
- - 40,000 40,000 0
Separate Consolidation Adjustments 20% Consol.Financial Statements 80% Minority Financial Should
P Co. S Co. Ref. Dr. Ref. Cr. Interest State BeAssets
Cash 63,500 10,000 73,500 Accounts receivable 100,000 27,500 (1b) (1b) 127,500 Inventory 175,000 40,000 (1b) (1b) 215,000 Investment in S Co. 120,000 (1a) 120,000 0
(1b)(1c)
Land 200,000 35,000 (1b) (1b) 235,000 Building & equip., net 325,000 80,000 (1b) (1b) 405,000 Patent 7,500 (1b) (1b) 7,500 Goodwill (1c) - Total assets 983,500 200,000 1,183,500
Liabilities & S.E.Accounts payable 125,000 26,925 (1b) (1b) 151,925 Bonds payable, net 483,500 78,075 561,575 Common stock: P Company 150,000 150,000 S Company 50,000 (1a) 40,000 10,000 - 0Retained earnings: P Company 225,000 225,000 S Company 45,000 (1a) 45,000 0Minority interest (10,000) 10,000 Total liab. & SE 983,500 200,000 40,000 - - 1,143,500
- - 40,000 40,000 0
Separate Consolidation Adjustments 20% Consol.Financial Statements 80% Minority Financial Should
P Co. S Co. Ref. Dr. Ref. Cr. Interest State BeAssets
Cash 63,500 10,000 73,500 Accounts receivable 100,000 27,500 (1b) (1b) 127,500 Inventory 175,000 40,000 (1b) (1b) 215,000 Investment in S Co. 120,000 (1a) 120,000 0
(1b)(1c)
Land 200,000 35,000 (1b) (1b) 235,000 Building & equip., net 325,000 80,000 (1b) (1b) 405,000 Patent 7,500 (1b) (1b) 7,500 Goodwill (1c) - Total assets 983,500 200,000 1,183,500
Liabilities & S.E.Accounts payable 125,000 26,925 (1b) (1b) 151,925 Bonds payable, net 483,500 78,075 561,575 Common stock: P Company 150,000 150,000 S Company 50,000 (1a) 40,000 10,000 - 0Retained earnings: P Company 225,000 225,000 S Company 45,000 (1a) 36,000 9,000 - 0Minority interest (19,000) 19,000 Total liab. & SE 983,500 200,000 76,000 - - 1,107,500
- - 76,000 76,000 0
Separate Consolidation Adjustments 20% Consol.Financial Statements 80% Minority Financial Should
P Co. S Co. Ref. Dr. Ref. Cr. Interest State BeAssets
Cash 63,500 10,000 73,500 Accounts receivable 100,000 27,500 (1b) (1b) 127,500 Inventory 175,000 40,000 (1b) (1b) 215,000 Investment in S Co. 120,000 (1a) 76,000 44,000 0
(1b)(1c)
Land 200,000 35,000 (1b) (1b) 235,000 Building & equip., net 325,000 80,000 (1b) (1b) 405,000 Patent 7,500 (1b) (1b) 7,500 Goodwill (1c) - Total assets 983,500 200,000 1,107,500
Liabilities & S.E.Accounts payable 125,000 26,925 (1b) (1b) 151,925 Bonds payable, net 483,500 78,075 561,575 Common stock: P Company 150,000 150,000 S Company 50,000 (1a) 40,000 10,000 - 0Retained earnings: P Company 225,000 225,000 S Company 45,000 (1a) 36,000 9,000 - 0Minority interest (19,000) 19,000 Total liab. & SE 983,500 200,000 76,000 76,000 - 1,107,500
- - - - 0
P Company and Consolidated Subsidiary
Supporting Calculations – 1/1/X1 (1a) $50,000 * 80% = $40,000 (P’s Share of S’s Common Stock)
$50,000 * 20% = $10,000 (Minority Interest in S’s Common Stock)
$45,000 * 80% = $36,000 (P’s Share of S’s Beg. Retained Earnings)
$45,000 * 20% = $9,000 (Minority Interest in S’s Beg. Retained Earnings)
Standard Consolidation Worksheet Adjustments at Date of Acquisition
1b) Various asset and liability accounts * % owned X,XXX Various asset and liability accounts * % owned X,XXX Investment in subsidiary X,XXX to recognize parent’s share of revaluation increments and decrements
P Company and Consolidated Subsidiary
Supporting Calculations – 1/1/X1 Revaluation increment (decrement) on date of acquisition (DOA) =
(FV of asset on DOA – BV of asset on DOA) * % owned
(1b) ($42,500 - $40,000) * 80% = $2,000 (P's Share of S’s Inventory Revaluation Increment at Date of Acquisition)
($50,000 - $35,000) * 80% = $12,000 (P's Share of S’s Land Revaluation Increment at Date of Acquisition)
($45,000 - $20,000) * 80% = $20,000 (P's Share of S’s Equipment Revaluation Increment at Date of Acquisition)
($-0- - $7,500) * 80% = ($6,000) (P's Share of S’s Patent Revaluation Decrement at Date of Acquisition)
AC FMV * % BV * %
GW RI(D)=2,000+12,000+20,000-6,000=28,000
120,000 104,000 = 76,000+28,000 76,000 = (50,000+45,000)*80%
Separate Consolidation Adjustments 20% Consol.Financial Statements 80% Minority Financial Should
P Co. S Co. Ref. Dr. Ref. Cr. Interest State BeAssets
Cash 63,500 10,000 73,500 Accounts receivable 100,000 27,500 (1b) (1b) 127,500 Inventory 175,000 40,000 (1b) 2,000 (1b) 217,000 Investment in S Co. 120,000 (1a) 76,000 16,000 0
(1b) 28,000 (1c)
Land 200,000 35,000 (1b) 12,000 (1b) 247,000 Building & equip., net 325,000 80,000 (1b) 20,000 (1b) 425,000 Patent 7,500 (1b) (1b) 6,000 1,500 Goodwill (1c) - Total assets 983,500 200,000 1,107,500
Liabilities & S.E.Accounts payable 125,000 26,925 (1b) (1b) 151,925 Bonds payable, net 483,500 78,075 561,575 Common stock: P Company 150,000 150,000 S Company 50,000 (1a) 40,000 10,000 - 0Retained earnings: P Company 225,000 225,000 S Company 45,000 (1a) 36,000 9,000 - 0Minority interest (19,000) 19,000 Total liab. & SE 983,500 200,000 110,000 110,000 - 1,107,500
- - - - 0
Standard Consolidation Worksheet Adjustments at Date of Acquisition
1c) Goodwill X,XXX Investment in subsidiary X,XXX to recognize goodwill
P Company and Consolidated Subsidiary
Supporting Calculations – 1/1/X1 (1c) AC FMV * % BV * %
GW=120,000–104,000 = 16,000RI(D)=2,000+12,000+20,000-6,000=28,000
120,000 104,000 = 76,000+28,000 76,000 = (50,000+45,000)*80%
$16,000 (Goodwill at Date of Acquisition)
Separate Consolidation Adjustments 20% Consol.Financial Statements 80% Minority Financial Should
P Co. S Co. Ref. Dr. Ref. Cr. Interest State BeAssets
Cash 63,500 10,000 73,500 Accounts receivable 100,000 27,500 (1b) (1b) 127,500 Inventory 175,000 40,000 (1b) 2,000 (1b) 217,000 Investment in S Co. 120,000 (1a) 76,000 - 0
(1b) 28,000 (1c) 16,000
Land 200,000 35,000 (1b) 12,000 (1b) 247,000 Building & equip., net 325,000 80,000 (1b) 20,000 (1b) 425,000 Patent 7,500 (1b) (1b) 6,000 1,500 Goodwill (1c) 16,000 16,000 Total assets 983,500 200,000 1,107,500
Liabilities & S.E.Accounts payable 125,000 26,925 (1b) (1b) 151,925 Bonds payable, net 483,500 78,075 561,575 Common stock: P Company 150,000 150,000 S Company 50,000 (1a) 40,000 10,000 - 0Retained earnings: P Company 225,000 225,000 S Company 45,000 (1a) 36,000 9,000 - 0Minority interest (19,000) 19,000 Total liab. & SE 983,500 200,000 126,000 126,000 - 1,107,500
- - - - 0
Separate Consolidation Adjustments 20% Consol.Financial Statements 80% Minority Financial Should
P Co. S Co. Ref. Dr. Ref. Cr. Interest State BeAssets
Cash 63,500 10,000 73,500 Accounts receivable 100,000 27,500 (1b) (1b) 127,500 Inventory 175,000 40,000 (1b) 2,000 (1b) 217,000 Investment in S Co. 120,000 (1a) 76,000 - 0
(1b) 28,000 (1c) 16,000
Land 200,000 35,000 (1b) 12,000 (1b) 247,000 Building & equip., net 325,000 80,000 (1b) 20,000 (1b) 425,000 Patent 7,500 (1b) (1b) 6,000 1,500 Goodwill (1c) 16,000 16,000 Total assets 983,500 200,000 1,107,500
Liabilities & S.E.Accounts payable 125,000 26,925 (1b) (1b) 151,925 Bonds payable, net 483,500 78,075 561,575 Common stock: P Company 150,000 150,000 S Company 50,000 (1a) 40,000 10,000 - 0Retained earnings: P Company 225,000 225,000 S Company 45,000 (1a) 36,000 9,000 - 0Minority interest (19,000) 19,000 Total liab. & SE 983,500 200,000 126,000 126,000 - 1,107,500
- - - - 0