Consolidations

Question 1

Consolidation at Acquisition

Answer 1

• Balance Sheet: P + S + FV increment

- Income Statement, Statement of R/E, and Cash flows is P only

Question 2

Decomposition Tool for Acquisition

Answer 2

Price Paid

—Goodwill

Net FV of Assets & Liabilities

—FV Increment

Net BV of Assets & Liabilities

Question 3

Eliminating Entry when P owns 100% of S

Answer 3

Common Stock (of subsidiary)
Additional Paid-in Cap (of subsidiary)
Retained Earnings (of subsidiary)
Identifiable Assets (of subsidiary to FV, as needed)
Goodwill (if Investment cost > FV of subsidiary’s NA)

• –Identifiable Liabilities (of subsidiary to FV, as needed)
• –Investment in subsidiary (from parent’s books)

Question 4

Eliminating Entry when P doesn’t down 100% of S

Answer 4

Common Stock (of subsidiary)
Add’l Paid-in Cap (of subsidiary)
Retained Earnings (of subsidiary)
Identifiable Assets (of subsidiary to FV, as needed)
Goodwill (if Investment value > FV of subsidiary’s NA)

• –Identifiable Liabilities (of subsidiary to FV, as needed)
• –Investment in subsidiary (from parent’s books)
• –Noncontrolling Interest

Question 5

Eliminating Entry for Dividends paid to P

Answer 5

Dividends Payable

—–Dividends Receivable

Question 6

Eliminating Entry for Bonds owned by P

Answer 6

Bonds Payable

—–Investment in Bonds

Question 7

Consolidation after Acquisition

Answer 7

• Balance Sheet: P + S + FV Increment - Intercompany Balances
• Income Statement: P + S since acquisition - Depreciation of FV Increment
• Equity: P only

Question 8

Equity Method Parent share of Income or Loss

Answer 8

Investment in Subsidiary

—–Income from equity investment

Question 9

Equity Method Parent Share of dividends declared

Answer 9

Dividends Receivable/Cash

—–Investment in Subsidiary

Question 10

Cost Method Parent Share if dividends declared

Answer 10

Dividends Receivable/Cash

—–Dividend Income

Question 11

Inventory Consolidation Table

Answer 11

———————Should be—–P—–S—–Eliminations
Sales(dr)
COGS(cr)
Inventory(cr)

Question 12

Depreciable Asset Consolidation Table

Answer 12

-----------------Should be-----What is-----Difference
Equipment
Accum Dep
Depreciation
Gain or R/E

Question 13

IFRS Noncontrolling Interest

Answer 13

IFRS permits noncontrolling interest to be recorded at FV or proportionate share of net assets, GAAP is FV only

Question 14

Cost of Sales in Consolidation

Answer 14

Add all cost of sales and decrease inventory sold to each other

Question 15

Noncontrolling interest when solving for goodwill

Answer 15

• Divide amount paid by controlling interest % and that’s the value of whole company bought
• Add calculated noncontrolling interest to amount paid and subtract FV of N/A to get Goodwill