4-1
Baker / Lembke / King
Consolidation
of Wholly
Owned
Subsidiaries
McGraw-Hill/ Irwin
Edited by Taufik Hidayat
4
Electronic Presentation by
Douglas Cloud
Pepperdine University
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Consolidation Procedures
 The
starting point for preparing
consolidated financial statements is the
books of the separate consolidating
companies.
 Because the consolidated entity has no
books, all amounts in the consolidated
financial statements originate on the
books of the parent and subsidiary.
Edited by Taufik Hidayat
McGraw-Hill/ Irwin
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
4-2
4-3
Consolidation Workpaper
Account Titles
Trial Balance Data
Parent
Subsidiary
Elimination Entries
Debits
Credits
Consolidated
Work flow
McGraw-Hill/ Irwin
Edited by Taufik Hidayat
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Nature of Eliminating Entries
…to reflectentries
the amounts
Eliminating
are used in the
that
would appear
if all the
consolidation
workpaper
to adjust
legally
separate
the
totals
of the companies
individual account
were
actually
single
balances
of athe
separate
company.
companies...
Eliminating entries appear
only in the consolidating
workpapers and do not
affect the books of the
separate companies.
McGraw-Hill/ Irwin
Edited by Taufik Hidayat
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
4-4
Full Ownership Purchased at Book Value
Peerless purchases all of Special Foods’
outstanding common stock for $300,000.
Let’s take a look at the balance
sheets of Peerless and Special
Foods immediately before
combination.
McGraw-Hill/ Irwin
Edited by Taufik Hidayat
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
4-5
Balance Sheets Before Combination
Assets
Cash
Accounts Receivable
Inventory
Land
Buildings and Equipment
Accumulated Depreciation
Total Assets
Liabilities and Stockholders’ Equity
Accounts Payable
Bonds Payable
Common Stock
Retained Earnings
Total Liabilities & Stockholders’ Equity
McGraw-Hill/ Irwin
Edited by Taufik Hidayat
4-6
Peerless
Special Foods
$ 350,000
75,000
100,000
175,000
800,000
(400,000)
$1,100,000
$ 50,000
50,000
60,000
40,000
600,000
(300,000 )
$500,000
$ 100,000
200,000
500,000
300,000
$1,100,000
$100,000
100,000
200,000
100,000
$500,000
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Full Ownership Purchased at Book Value
P
100%
S
Investment cost
$300,000
Book value:
Common stock-Special Foods
$200,000
Retained earnings-Special Foods 100,000
$300,000
Peerless’s share
x 1.00 (300,000)
Differential
$
-0-
January 1, 20X1 entry:
Investment in Special Foods Stock
Cash
300,000
300,000
Record purchase of Special Foods stock.
McGraw-Hill/ Irwin
Edited by Taufik Hidayat
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
4-7
Balance Sheets After Combination
Peerless
Assets
Cash
$ 350,000
Accounts Receivable
75,000
Inventory
100,000
Land
175,000
Buildings and Equipment
800,000
Accumulated Depreciation
(400,000)
Investment in Special Foods Stock
300,000
Total Assets
$1,100,000
Liabilities and Stockholders’ Equity
Accounts Payable
$ 100,000
Bonds Payable
200,000
Common Stock
500,000
Retained Earnings
300,000
Total Liabilities & Stockholders’ Equity $1,100,000
McGraw-Hill/ Irwin
Edited by Taufik Hidayat
4-8
Special Foods
$ 50,000
50,000
60,000
40,000
600,000
(300,000 )
$500,000
$100,000
100,000
200,000
100,000
$500,000
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
4-9
100% Purchase at Book Value
Account Titles
Trial Balance Data
Peerless Spec. Foods
Elimination Entries
Debits
Credits
Consolidated
Cash
50,000
Accounts Rec.
75,000
Inventory
100,000
Land
175,000
Bldg. and Equip.
800,000
Inv. in Sp. Foods
300,000
Total Debits
1,500,000
50,000
50,000
60,000
40,000
600,000
100,000
125,000
160,000
215,000
1,400,000
800,000
2,000,000
Accum. Depr.
400,000
Accounts Payable 100,000
Bonds Payable
200,000
Common Stock
500,000
Retained Earn.
300,000
Total Credits
1,500,000
300,000
100,000
100,000
200,000
100,000
800,000
700,000
200,000
300,000
500,000
300,000
2,000,000
McGraw-Hill/ Irwin
Edited by Taufik Hidayat
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
4-10
100% Purchase at Book Value
Account Titles
Trial Balance Data
Peerless Spec. Foods
Elimination Entries
Debits
Credits
Cash
50,000
Accounts Rec.
75,000
Inventory
100,000
Land
175,000
Bldg. and Equip.
800,000
Inv. in Sp. Foods
300,000
Total Debits
1,500,000
50,000
50,000
60,000
40,000
600,000
Accum. Depr.
400,000
Accounts Payable 100,000
Bonds Payable
200,000
Common Stock
500,000
Retained Earn.
300,000
Total Credits
1,500,000
300,000
100,000
100,000
200,000 (1)200,000
100,000 (1)100,000
800,000
McGraw-Hill/ Irwin
(1) 300,000
800,000
Edited by Taufik Hidayat
Consolidated
100,000
125,000
160,000
215,000
1,400,000
2,000,000
700,000
200,000
300,000
500,000
300,000
2,000,000
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
4-11
100% Purchase at Book Value
Account Titles
Trial Balance Data
Peerless Spec. Foods
Elimination Entries
Debits
Credits
Cash
50,000
Accounts Rec.
75,000
Inventory
100,000
Land
175,000
Bldg. and Equip.
800,000
Inv. in Sp. Foods
300,000
Total Debits
1,500,000
50,000
50,000
60,000
40,000
600,000
Accum. Depr.
400,000
Accounts Payable 100,000
Bonds Payable
200,000
Common Stock
500,000
Retained Earn.
300,000
Total Credits
1,500,000
300,000
100,000
100,000
200,000 (1)200,000
100,000 (1)100,000
800,000
McGraw-Hill/ Irwin
(1) 300,000
800,000
Edited by Taufik Hidayat
Consolidated
100,000
125,000
160,000
215,000
1,400,000
2,000,000
700,000
200,000
300,000
500,000
300,000
2,000,000
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Elimination Entry E(1)
Entry E(1)
Common Stock--Special Foods
200,000
Retained Earnings
100,000
Investment in Special Foods Stock 300,000
Eliminate investment balance.
McGraw-Hill/ Irwin
Edited by Taufik Hidayat
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
4-12
Purchase At More Than Book Value
Reasons the purchase price of a company’s
stock might exceed the stock’s book value:
 Errors or omissions on the books of the
subsidiary
 Excess of fair value over the book
value of the subsidiary’s net identifiable
assets
 Existence of goodwill
 Other reasons
Edited by Taufik Hidayat
McGraw-Hill/ Irwin
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
4-13
Purchase At More Than Book Value
P
4-14
Investment cost
$340,000
Book value:
Common stock-Special Foods
$200,000
100%
Retained earnings-Special Foods 100,000
$300,000
Peerless’s share
x 1.00 (300,000)
Differential
$ 40,000
S
January 1, 20X1 entry:
Investment in Special Foods Stock
Cash
340,000
340,000
Record purchase of Special Foods stock.
McGraw-Hill/ Irwin
Edited by Taufik Hidayat
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Purchase At More Than Book Value
P
4-15
Investment cost
$340,000
Book value:
Common stock-Special Foods
$200,000
100%
Retained earnings-Special Foods 100,000
$300,000
Peerless’s share
x 1.00 (300,000)
Differential
$ 40,000
S
The elimination entry on the workpaper would be:
E(1) Common Stock--Special Foods
200,000
Retained Earnings
100,000
Differential
40,000
Investment in Special Foods Stock
340,000
McGraw-Hill/ Irwin
Edited by Taufik Hidayat
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Purchase At More Than Book Value
Account Titles
Trial Balance Data
Peerless Spec. Foods
Elimination Entries
Debits
Credits
Cash
10,000
Accounts Rec.
75,000
Inventory
100,000
Land
175,000
Bldg. and Equip. 800,000
Inv. in Sp. Foods 340,000
Differential
Total Debits
1,500,000
50,000
50,000
60,000
40,000
600,000
Accum. Depr.
400,000
Accounts Payable 100,000
Bonds Payable
200,000
Common Stock
500,000
Retained Earn.
300,000
Total Credits
1,500,000
300,000
100,000
100,000
200,000 (1)200,000
100,000 (1)100,000
800,000
McGraw-Hill/ Irwin
Consolidated
(1) 340,000
(1) 40,000
800,000
Edited by Taufik Hidayat
4-16
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Purchase At More Than Book Value
Account Titles
Trial Balance Data
Peerless Spec. Foods
Elimination Entries
Debits
Credits
Cash
10,000
Accounts Rec.
75,000
Inventory
100,000
Land
175,000
Bldg. and Equip. 800,000
Inv. in Sp. Foods 340,000
Differential
Total Debits
1,500,000
50,000
50,000
60,000
40,000
600,000
Accum. Depr.
400,000
Accounts Payable 100,000
Bonds Payable
200,000
Common Stock
500,000
Retained Earn.
300,000
Total Credits
1,500,000
300,000
100,000
100,000
200,000 (1)200,000
100,000 (1)100,000
800,000
McGraw-Hill/ Irwin
Consolidated
(2) 40,000
(1) 340,000
(1) 40,000 (2) 40,000
800,000
Edited by Taufik Hidayat
4-17
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Purchase At More Than Book Value
Account Titles
Trial Balance Data
Peerless Spec. Foods
Elimination Entries
Debits
Credits
4-18
Consolidated
60,000
125,000
160,000
255,000
1,400,000
Cash
10,000
Accounts Rec.
75,000
Inventory
100,000
Land
175,000
Bldg. and Equip. 800,000
Inv. in Sp. Foods 340,000
Differential
Total Debits
1,500,000
50,000
50,000
60,000
40,000
600,000
800,000
2,000,000
Accum. Depr.
400,000
Accounts Payable 100,000
Bonds Payable
200,000
Common Stock
500,000
Retained Earn.
300,000
Total Credits
1,500,000
300,000
100,000
100,000
200,000 (1)200,000
100,000 (1)100,000
380,000
800,000
700,000
200,000
300,000
500,000
300,000
2,000,000
McGraw-Hill/ Irwin
Edited by Taufik Hidayat
(2) 40,000
(1) 340,000
(1) 40,000 (2) 40,000
380,000
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Elimination Entry E(5)
Entry E(2)
Land
40,000
Differential
40,000
McGraw-Hill/ Irwin
Edited by Taufik Hidayat
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
4-19
Existence of Goodwill
If a company purchases a subsidiary
at a price in excess of the total of the
fair value of the subsidiary’s net
identifiable assets, the additional
amount generally is considered to be
a payment for the excess earning
power of the acquired company,
referred to as goodwill.
McGraw-Hill/ Irwin
Edited by Taufik Hidayat
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
4-20
PSAK No. 22
4-21
• Selisih lebih antara biaya perolehan dan bagian
(interest) perusahaan pengakuisisi atas nilai
wajar aktiva dan kewajiban yang dapat
diidentifikasi pada tanggal transaksi pertukaran
diakui sebagai goodwill dan disajikan sebagai
aktiva.
• Goodwill harus diamortisasi sebagai beban
selama
masa
manfaatnya.
Dalam
mengamortisasi goodwill digunakan metode garis
lurus.
• Periode amortisasi goodwill tidak boleh lebih dari
5 tahun, kecuali periode yang lebih panjang
tetapi tidak lebih dari 20 tahun.
Edited by Taufik Hidayat
McGraw-Hill/ Irwin
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Existence of Goodwill
4-22
If the fair values of Special Foods’
assets and liabilities are equal to their
book values, and the $40,000
differential is considered a payment for
goodwill, the following elimination entry
is needed:
E(2) Goodwill
Differential
40,000
40,000
Assign differential to goodwill.
McGraw-Hill/ Irwin
Edited by Taufik Hidayat
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Illustration of Debit Differential
Peerless Products acquires all Special Foods’
capital stock for $400,000 on January 1, 20X1,
by issuing $100,000 of 9 percent first mortgage
bonds and paying cash of $300,000.
McGraw-Hill/ Irwin
Edited by Taufik Hidayat
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
4-23
Balance Sheets – Special Food
Book Value
Assets
Cash
$ 50,000
Accounts Receivable
50,000
Inventory
60,000
Land
40,000
Buildings and Equipment
600,000
Accumulated Depreciation
(300,000)
Total Assets
$500,000
Liabilities and Stockholders’ Equity
Accounts Payable
$ 100,000
Bonds Payable
100,000
Common Stock
200,000
Retained Earnings
100,000
Total Liabilities & Stockholders’ Equity $500,000
Fair Value of Net Asset
McGraw-Hill/ Irwin
Edited by Taufik Hidayat
4-24
Fair Value
$ 50,000
50,000
75,000
100,000
290,000
$565,000
$100,000
135,000
$330,000
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
4-25
Debit Differential
P
100%
S
Investment cost
$400,000
Book value:
Common stock--Special Foods $200,000
Retained earnings--Special Foods 100,000
$300,000
Peerless’s share
x 1.00 (300,000)
Differential
$100,000
January 1, 20X1 entry:
Investment in Special Foods Stock
Bonds Payable
Cash
400,000
100,000
300,000
Record purchase of Special Foods stock.
McGraw-Hill/ Irwin
Edited by Taufik Hidayat
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
4-26
Debit Differential
Cost of investment
$400,000
Total
differential
$100,000
Excess of cost over
fair value of net
identifiable assets
$70,000
Goodwill
Fair value of net
identifiable assets
$330,000
Book value of net
identifiable assets
$300,000
McGraw-Hill/ Irwin
Edited by Taufik Hidayat
Excess of fair value
over book value of
net identifiable
assets
$30,000
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
4-27
Debit Differential
The eliminations entered in the consolidation workpaper in
preparing the consolidated balance sheet immediately after
the combination are:
E(1) Common Stock--Special Foods
200,000
Retained Earnings
100,000
Differential
100,000
Investment in Special Foods Stock
400,000
Eliminate investment balance.
E(2) Inventory
Land
Goodwill
Buildings and Equipment
Premium on Bonds Payable
Differential
15,000
60,000
70,000
10,000
35,000
100,000
Assign differential.
McGraw-Hill/ Irwin
Edited by Taufik Hidayat
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Illustration of Credit Differential
Peerless Products acquires all Special Foods’
capital stock for $260,000 on January 1, 20X1,
by paying cash.
McGraw-Hill/ Irwin
Edited by Taufik Hidayat
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
4-28
Balance Sheets – Special Food
Book Value
Assets
Cash
$ 50,000
Accounts Receivable
50,000
Inventory
60,000
Land
40,000
Buildings and Equipment
600,000
Accumulated Depreciation
(300,000)
Total Assets
$500,000
Liabilities and Stockholders’ Equity
Accounts Payable
$ 100,000
Bonds Payable
100,000
Common Stock
200,000
Retained Earnings
100,000
Total Liabilities & Stockholders’ Equity $500,000
Fair Value of Net Asset
McGraw-Hill/ Irwin
Edited by Taufik Hidayat
4-29
Fair Value
$ 50,000
50,000
60,000
45,000
280,000
$485,000
$100,000
100,000
$285,000
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Credit Differential
P
100%
S
4-30
Investment cost
$260,000
Book value:
Common stock--Special Foods $200,000
Retained earnings--Special Foods 100,000
$300,000
Peerless’s share
x 1.00 (300,000)
Differential
$(40,000)
January 1, 20X1 entry:
Investment in Special Foods Stock
Cash
260,000
260,000
Record purchase of Special Foods stock.
McGraw-Hill/ Irwin
Edited by Taufik Hidayat
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Credit Differential
4-31
Book value of net
identifiable assets
$300,000
Total
differential
$(40,000)
Fair value of net
identifiable assets
$285,000
Cost of investment
$260,000
McGraw-Hill/ Irwin
Edited by Taufik Hidayat
Excess of book
value over fair
value of net
identifiable assets
$15,000
Excess of fair value
of net identifiable
assets over cost
$25,000
Negative Goodwill
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Credit Differential
4-32
The eliminations entered in the consolidation workpaper in
preparing the consolidated balance sheet immediately after
the combination are:
E(1) Common Stock--Special Foods
200,000
Retained Earnings
100,000
Investment in Special Foods Stock
260,000
Differential
40,000
Eliminate investment balance.
E(2) Land
Differential
Buildings and Equipment
5,000
15,000
20,000
Assign differential to Fair Value.
McGraw-Hill/ Irwin
Edited by Taufik Hidayat
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Allocation of Credit Differential
Fair Value Allocation Unallocated
Ratio
Differential
Assets
Land$
Bulding & Equipment
Total
45,000
280,000
325,000
45/325
280/325
E(3) Differential
Land
Buildings and Equipment
$(25,000)
(25,000)
25,000
4-33
Allocated
Reduction
$(3,462)
(21,538)
$(25,000)
3,462
21,538
Assign remaining credit differential.
McGraw-Hill/ Irwin
Edited by Taufik Hidayat
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Consolidation Subsequent to Acquisition
Push Corporation owns 80 percent of the stock
of Shove Company, which was purchased at
book value. During 20X1, Shove reports net
income of $25,000, while Push reports earnings
of $100,000, plus equity-method investment
income of $20,000.
McGraw-Hill/ Irwin
Edited by Taufik Hidayat
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
5-34
Computation of Consolidated Net Income
Additive Computation
Separate operating income of Push
Net income of Shove
Push’s proportionate share
Consolidated net income
Residual Computation
Net income of Push
Less: Income from subsidiary
Net income of Shove
$25,000
x
.80
$120,000
- 20,000
Less: Income to noncontrolling interest $25,000
x
.20
Consolidated net income
McGraw-Hill/ Irwin
Edited by Taufik Hidayat
$100,000
20,000
$120,000
$100,000
25,000
$125,000
- 5,000
$120,000
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
5-35
Consolidated Retained Earnings
5-36
On January 1, 20X1, Push has a retained
earnings balance of $400,000, and Shove has a
retained earnings balance of $250,000. During
20X1, Push reports net income of $100,000 and
equity-method income from Shove of $20,000;
Push declares dividends of $30,000. Shove
reports net income of $25,000 and declares
dividends of $10,000.
McGraw-Hill/ Irwin
Edited by Taufik Hidayat
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Consolidated Retained Earnings
Push
Shove
$400,000
$250,000
Net income, 20X1
120,000
25,000
Dividends declared in 20X1
- 30,000
- 10,000
$490,000
$265,000
Balance, January 1, 20X1
Balance, December 31, 20X1
5-37
Consolidated retained earnings equals
the parent’s retained earnings when the
parent uses the equity method
McGraw-Hill/ Irwin
Edited by Taufik Hidayat
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Consolidated Retained Earnings
When the parent does not account for its
subsidiary investment using the equity
method, consolidated retained earnings is
determined by adding the parent’s
retained earnings from its own operations
and the parent’s share of the subsidiary’s
net income from the date of acquisition.
McGraw-Hill/ Irwin
Edited by Taufik Hidayat
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
5-38
Comprehensive Three-Part Workpaper
Item
Trial Balance Data
Parent
Subsidiary
Elimination Entries
Debits
Credits
Consolidated
Credit Accounts:
Revenues
Gains
Debit Accounts:
INCOME STATEMENT SECTION
Contra Revenues
Expenses
Losses
Net Income
Beginning Retained
Earnings
Add: Net Income
RETAINED EARNINGS SECTION
Deduct: Dividends
Ending Retained
Earnings
to Balance Sheet section
McGraw-Hill/ Irwin
Edited by Taufik Hidayat
5-39
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Comprehensive Three-Part Workpaper
Item
Debit Accounts:
Assets
Contra Liabilities
Credit Accounts:
Contra Assets
Liabilities
Stockholders’
Equity:
Capital Stock
Paid-in Capital
Retained
Earnings
Trial Balance Data
Parent
Subsidiary
Elimination Entries
Debits
Credits
Consolidated
BALANCE SHEET SECTION
From Retained Earnings
Statement section
McGraw-Hill/ Irwin
Edited by Taufik Hidayat
5-40
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
20X1 Consolidation--100 Percent Ownership
Common Stock, January 1, 20X1
Retained Earnings, January 1, 20X1
20X1:
Separate Operating Income, Peerless
Net Income, Special Foods
Dividends
20X2:
Separate Operating Income, Peerless
Net Income, Special Foods
Dividends
McGraw-Hill/ Irwin
Edited by Taufik Hidayat
5-41
Peerless
Products
Special
Foods
$500,000
300,000
$200,000
100,000
140,000
60,000
160,000
60,000
50,000
30,000
75,000
40,000
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
5-42
20X1 Consolidation--100 Percent Ownership
Investment cost
$300,000
Book value:
Common stock--Special Foods
$200,000
100%
Retained earnings--Special Foods 100,000
$300,000
Peerless’s share
x 1.00 -300,000
Differential
$
-0S
P
January 1, 20X1
(1) Investment in Special Foods Stock
Cash
Record purchase of Special Foods stock.
McGraw-Hill/ Irwin
Edited by Taufik Hidayat
300,000
300,000
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
20X1 Consolidation--100 Percent Ownership
Peerless records its 20X1 income and dividends from Special
Foods under the equity method with the following entries:
(2) Investment in Special Foods Stock
Income from Subsidiary
Record equity-method income.
50,000
50,000
$50,000 x 1.00
(3) Cash
30,000
Investment in Special Foods Stock
30,000
Record dividends from Special Foods.
$30,000 x 1.00
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Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
5-43
20X1 Consolidation--100 Percent Ownership
Trial Balance Data
Parent
Subsidiary
Item
Income from
Subsidiary
50,000
Dividends Declared
(60,000)
Elimination Entries
Debits
Credits
(1)
(30,000)
Consolidated
50,000
(1)
30,000
(1)
20,000
(60,000)
Investment in Special
Foods Stock
320,000
Remove both the investment income reflected in
the parent’s income statement and the parent’s
portion of any dividends declared by the subsidiary.
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Edited by Taufik Hidayat
5-44
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
20X1 Consolidation--100 Percent Ownership
Item
Income from
Subsidiary
Retained Earnings,
January 1
Dividends Declared
Trial Balance Data
Parent
Subsidiary
50,000
300,000
(60,000)
Elimination Entries
Debits
Credits
(1)
500,000
100,000 (2)100,000
(30,000)
(1) 30,000
200,000
Consolidated
50,000
Investment in Special
Foods Stock
320,000
Common Stock
5-45
(2)200,000
(1) 20,000
(2)300,000
300,000
(60,000)
500,000
Remove the intercorporate ownership claim and stockholders’
accounts of the subsidiary as of the beginning of the period.
McGraw-Hill/ Irwin
Edited by Taufik Hidayat
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
20X2 Consolidation--100 Percent Ownership
Peerless records its 20X2 income and dividends from Special
Foods under the equity method with the following entries:
(1) Investment in Special Foods Stock
Income from Subsidiary
75,000
75,000
Record equity-method income.
$75,000
x 1.00
(2) Cash
40,000
Investment in Special Foods Stock
40,000
Record dividends from Special Foods.
$40,000 x 1.00
McGraw-Hill/ Irwin
Edited by Taufik Hidayat
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
5-46
20X2 Consolidation--100 Percent Ownership
Item
Income from
Subsidiary
Retained Earnings,
January 1
Dividends Declared
Trial Balance Data
Parent
Subsidiary
75,000
430,000
(60,000)
Elimination Entries
Debits
Credits
(1)
120,000
(40,000)
Investment in Special
Foods Stock
355,000
5-47
Consolidated
75,000
(1)
40,000
(1)
35,000
(60,000)
Remove the intercorporate ownership claim and stockholders’
accounts of the subsidiary recorded during the period.
McGraw-Hill/ Irwin
Edited by Taufik Hidayat
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
20X2 Consolidation--100 Percent Ownership
Item
Income from
Subsidiary
Retained Earnings,
January 1
Dividends Declared
Trial Balance Data
Parent
Subsidiary
75,000
430,000
(60,000)
Elimination Entries
Debits
Credits
(1)
500,000
Consolidated
75,000
120,000 (2)120,000
(40,000)
Investment in Special
Foods Stock
355,000
Common Stock
(1)
40,000
35,000
(2) 320,000
430,000
(60,000 )
(1)
200,000
(2)200,000
500,000
Eliminate the beginning balance in the investment account
and the stockholders’ equity accounts of the subsidiary at the
beginning of 20X2.
McGraw-Hill/ Irwin
5-48
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Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter Four
4-49
The
End
McGraw-Hill/ Irwin
Edited by Taufik Hidayat
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.