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
Direct Ownership of Indirect Ownership of
Co. Z by Co. A Co. Z by Co. A

Company A Company A

owns shares in owns shares in

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%

1. Level of economic influence

Nominal “Significant influence” Control

2. Financial statement presentation

Investment Account Consolidated
Separate Financial Statements Financial 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
Fair Value of Book Value
Acquisition Identifiable Net X % of Net Assets X %
Cost Assets Acquired Owned Acquired Owned

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

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 Consolidated
Financial Statements 100% Financial
P Company S Company Ref. Dr. Ref. Cr. Statements
Assets
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 Consolidated
Financial Statements 100% Financial Should
P Company S Company Ref. Dr. Ref. Cr. Statements Be
Assets
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 0
Retained earnings:
P Company 225,000 225,000
S Company 45,000 (1a) 45,000 0
Total liab. & SE 983,500 200,000 - - 1,183,500
- - - -
 Separate Consolidation Adjustments Consolidated
Financial Statements 100% Financial Should
P Company S Company Ref. Dr. Ref. Cr. Statements Be
Assets
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 0
Retained earnings:
P Company 225,000 225,000
S Company 45,000 (1a) 45,000 0
Total liab. & SE 983,500 200,000 - - 1,183,500
- - - -
 Separate Consolidation Adjustments Consolidated
Financial Statements 100% Financial Should
P Company S Company Ref. Dr. Ref. Cr. Statements Be
Assets
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 - 0
Retained earnings:
P Company 225,000 225,000
S Company 45,000 (1a) 45,000 0
Total liab. & SE 983,500 200,000 50,000 - 1,133,500
- - 50,000 50,000
 Separate Consolidation Adjustments Consolidated
Financial Statements 100% Financial Should
P Company S Company Ref. Dr. Ref. Cr. Statements Be
Assets
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 - 0
Retained earnings:
P Company 225,000 225,000
S Company 45,000 (1a) 45,000 - 0
Total liab. & SE 983,500 200,000 95,000 - 1,088,500
- - 95,000 95,000
 Separate Consolidation Adjustments Consolidated
Financial Statements 100% Financial Should
P Co. S Co. Ref. Dr. Ref. Cr. Statements Be
Assets
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 - 0
Retained earnings:
P Company 225,000 225,000
S Company 45,000 (1a) 45,000 - 0
Total 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 Consolidated
Financial Statements 100% Financial Should
P Co. S Co. Ref. Dr. Ref. Cr. Statements Be
Assets
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 - 0
Retained earnings:
P Company 225,000 225,000
S Company 45,000 (1a) 45,000 - 0
Total liab. & SE 983,500 200,000 95,000 95,000 1,088,500
- - - -
 Separate Consolidation Adjustments Consol
Financial Statements 100% Financial Should
P Co. S Co. Ref. Dr. Ref. Cr. Statements Be
Assets
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 - 0
Retained earnings:
P Company 225,000 225,000
S Company 45,000 (1a) 45,000 - 0
Total liab. & SE 983,500 200,000 137,500 102,500 1,088,500
- - 35,000 35,000
 Separate Consolidation Adjustments Consol
Financial Statements 100% Financial Should
P Co. S Co. Ref. Dr. Ref. Cr. Statements Be
Assets
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 - 0
Retained earnings:
P Company 225,000 225,000
S Company 45,000 (1a) 45,000 - 0
Total 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 = 20,000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%

$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 Consolidated
Financial Statements 100% Financial Should
P Co. S Co. Ref. Dr. Ref. Cr. Statements Be
Assets
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 - 0
Retained earnings:
P Company 225,000 225,000
S Company 45,000 (1a) 45,000 - 0
Total liab. & SE 983,500 200,000 157,500 137,500 1,088,500
- - 20,000 20,000
 Separate Consolidation Adjustments Consolidated
Financial Statements 100% Financial Should
P Co. S Co. Ref. Dr. Ref. Cr. Statements Be
Assets
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 - 0
Retained earnings:
P Company 225,000 225,000
S Company 45,000 (1a) 45,000 - 0
Total liab. & SE 983,500 200,000 157,500 157,500 1,088,500
- - - -
 Separate Consolidation Adjustments Consolidated
Financial Statements 100% Financial Should
P Co. S Co. Ref. Dr. Ref. Cr. Statements Be
Assets
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 - 0
Retained earnings:
P Company 225,000 225,000
S Company 45,000 (1a) 45,000 - 0
Total liab. & SE 983,500 200,000 157,500 157,500 1,088,500
- - - -
 Steps in Consolidation Worksheet
Procedure at Date of Acquisition
With 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 minority interest column
• complete consolidated column
• prepare consolidated balance sheet from worksheet
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% Consolidated
Financial Statements 80% Minority Financial
P Co. S Co. Ref. Dr. Ref. Cr. Interest Statements
Assets 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 Be
Assets
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 0
Retained earnings:
P Company 225,000 225,000
S Company 45,000 (1a) 45,000 0
Minority 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 Be
Assets
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 0
Retained earnings:
P Company 225,000 225,000
S Company 45,000 (1a) 45,000 0
Minority 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 Be
Assets
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 - 0
Retained earnings:
P Company 225,000 225,000
S Company 45,000 (1a) 45,000 0
Minority 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 Be
Assets
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 - 0
Retained earnings:
P Company 225,000 225,000
S Company 45,000 (1a) 45,000 0
Minority 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 Be
Assets
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 - 0
Retained earnings:
P Company 225,000 225,000
S Company 45,000 (1a) 36,000 9,000 - 0
Minority 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 Be
Assets
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 - 0
Retained earnings:
P Company 225,000 225,000
S Company 45,000 (1a) 36,000 9,000 - 0
Minority 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 Be
Assets
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 - 0
Retained earnings:
P Company 225,000 225,000
S Company 45,000 (1a) 36,000 9,000 - 0
Minority 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 = 16,000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%

$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 Be
Assets
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 - 0
Retained earnings:
P Company 225,000 225,000
S Company 45,000 (1a) 36,000 9,000 - 0
Minority 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 Be
Assets
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 - 0
Retained earnings:
P Company 225,000 225,000
S Company 45,000 (1a) 36,000 9,000 - 0
Minority interest (19,000) 19,000
Total liab. & SE 983,500 200,000 126,000 126,000 - 1,107,500
- - - - 0