Documente Academic
Documente Profesional
Documente Cultură
Company A Company A
Company Z Company Y
owns shares in
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 Consolidation
Percentage of Outstanding Voting Stock Acquired
0% 20% 50% 100%
Revaluation
Goodwill Increment
Valuation Differential
Steps in Consolidation Worksheet
Procedure at Date of Acquisition
Without 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
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