Chapter 04 - Consolidation of Wholly Owned Subsidiaries

Chapter 04
Consolidation of Wholly Owned Subsidiaries

Multiple Choice Questions

On July 1, 2009, Lin Corporation paid !"40,000 for all of #insel Co$pany%s outstandin&
'o$$on sto'( On that date, the 'osts and fair )alues of #insel%s re'orded assets and liabilities
were as follows*


1( +ased on the pre'edin& infor$ation, the differential refle'ted in a 'onsolidation worpaper
to prepare a 'onsolidated balan'e sheet i$$ediately after the business 'o$bination is*
,( !0(
+( !2-,000(
C( !.0,000(
/( !4-,000(

2( +ased on the pre'edin& infor$ation, what a$ount should be allo'ated to &oodwill in the
'onsolidated balan'e sheet, prepared after this business 'o$bination0
,( !0
+( !2-,000
C( !.0,000
/( !4-,000

4-1
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
On /e'e$ber "1, 2009, ,dd-On Co$pany a'1uired 100 per'ent of 2enus Corporation%s
'o$$on sto' for !"00,000( +alan'e sheet infor$ation 2enus 3ust prior to the a'1uisition is
&i)en here*

,t the date of the business 'o$bination, 2enus%s net assets and liabilities appro4i$ated fair
)alue e4'ept for in)entory, whi'h had a fair )alue of !50,000, land whi'h had a fair )alue of
!12-,000, and buildin&s and e1uip$ent 6net7, whi'h had a fair )alue of !2-0,000(

"( +ased on the infor$ation pro)ided, what a$ount of in)entory will be in'luded in the
'onsolidated balan'e sheet i$$ediately followin& the a'1uisition0
,( !50,000
+( !.-,000
C( !1-,000
/( !4-,000

4-2
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
4( +ased on the infor$ation pro)ided, what a$ount of &oodwill will be in'luded in the
'onsolidated balan'e sheet i$$ediately followin& the a'1uisition0
,( !"0,000
+( !1-,000
C( !8-,000
/( !4-,000

-( +ased on the infor$ation pro)ided, what a$ount of differential will be refle'ted in a
'onsolidation worpaper to prepare a 'onsolidated balan'e sheet i$$ediately after the
business 'o$bination0
,( !0
+( !4-,000
C( !1-,000
/( !8-,000

5( +ased on the infor$ation pro)ided, what a$ount will be in'luded as in)est$ent in 2enus
Corporation in the 'onsolidated balan'e sheet i$$ediately followin& the a'1uisition0
,( !0
+( !"9-,000
C( !2--,000
/( !"00,000

4-"
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
9nya Corporation a'1uired 100 per'ent of Celti' Corporation%s 'o$$on sto' on January 1,
2009( Su$$ari:ed balan'e sheet infor$ation for the two 'o$panies i$$ediately after the
'o$bination is pro)ided*


.( +ased on the pre'edin& infor$ation, the a$ount of differential asso'iated with the
a'1uisition is*
,( !0(
+( !-8,000(
C( !22,000(
/( !"5,000(

8( +ased on the infor$ation pro)ided, the 'onsolidated balan'e sheet of 9nya and Celti' will
refle't &oodwill in the a$ount of*
,( !0(
+( !-8,000(
C( !22,000(
/( !"5,000(

4-4
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
9( On January 1, 2008, +lae Co$pany a'1uired all of ;rost Corporation%s )otin& shares for
!280,000 'ash( On /e'e$ber "1, 2009, ;rost owed +lae !-,000 for ser)i'es pro)ided durin&
the year( When 'onsolidated finan'ial state$ents are prepared for 2009, whi'h entry is needed
to eli$inate inter'o$pany re'ei)ables and payables in the 'onsolidation worpaper0

,( Option ,
+( Option +
C( Option C
/( Option /

4--
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
<a'e Corporation a'1uired 100 per'ent of Spin Co$pany%s 'o$$on sto' on January 1,
2009( +alan'e sheet data for the two 'o$panies i$$ediately followin& the a'1uisition follow*

,t the date of the business 'o$bination, the boo )alues of Spin%s net assets and liabilities
appro4i$ated fair )alue e4'ept for in)entory, whi'h had a fair )alue of !50,000, and land,
whi'h had a fair )alue of !-0,000( #he fair )alue of land for <a'e Corporation was esti$ated
at !80,000 i$$ediately prior to the a'1uisition(

10( +ased on the pre'edin& infor$ation, at what a$ount should total land be reported in the
'onsolidated balan'e sheet prepared i$$ediately after the business 'o$bination0
,( !1"0,000
+( !10-,000
C( !11-,000
/( !120,000

4-5
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
11( +ased on the pre'edin& infor$ation, what a$ount of total assets will appear in the
'onsolidated balan'e sheet prepared i$$ediately after the business 'o$bination0
,( !.-5,000
+( !."-,000
C( !.-0,000
/( !542,000

12( +ased on the pre'edin& infor$ation, what is the differential asso'iated with the
a'1uisition0
,( !1-,000
+( !21,000
C( !5,000
/( !10,000

1"( +ased on the pre'edin& infor$ation, what a$ount of &oodwill will be reported in the
'onsolidated balan'e sheet prepared i$$ediately after the business 'o$bination0
,( !0
+( !21,000
C( !5,000
/( !1-,000

14( +ased on the pre'edin& infor$ation, what a$ount of liabilities will be reported in the
'onsolidated balan'e sheet prepared i$$ediately after the business 'o$bination0
,( !51-,000
+( !405,000
C( !"00,000
/( !25-,000

1-( +ased on the pre'edin& infor$ation, what a$ount of retained earnin&s will be reported in
the 'onsolidated balan'e sheet prepared i$$ediately after the business 'o$bination0
,( !"00,000
+( !409,000
C( !2-9,000
/( !191,000

4-.
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
15( +ased on the pre'edin& infor$ation, what a$ount of total sto'holder%s e1uity will be
reported in the 'onsolidated balan'e sheet prepared i$$ediately after the business
'o$bination0
,( !"00,000
+( !4.9,000
C( !"1-,000
/( !"-0,000

On /e'e$ber "1, 2008, =er'ury Corporation a'1uired 100 per'ent ownership of Saturn
Corporation( On that date, Saturn reported assets and liabilities with boo )alues of !"00,000
and !100,000, respe'ti)ely, 'o$$on sto' outstandin& of !-0,000, and retained earnin&s of
!1-0,000( #he boo )alues and fair )alues of Saturn%s assets and liabilities were identi'al
e4'ept for land whi'h had in'reased in )alue by !10,000 and in)entories whi'h had de'reased
by !-,000(

1.( +ased on the pre'edin& infor$ation, what a$ount of differential will appear in the
eli$inatin& entries re1uired to prepare a 'onsolidated balan'e sheet i$$ediately after the
business 'o$bination, if the a'1uisition pri'e was !240,0000
,( !0
+( !40,000
C( !2-,000
/( !-,000

18( +ased on the pre'edin& infor$ation, what a$ount of &oodwill will be reported if the
a'1uisition pri'e was !240,0000
,( !0
+( !40,000
C( !1-,000
/( !"-,000

4-8
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
19( +ased on the pre'edin& infor$ation, whi'h of the followin& will pertain to the differential
that will appear in the eli$inatin& entries re1uired to prepare a 'onsolidated balan'e sheet
i$$ediately after the business 'o$bination, if the a'1uisition pri'e was !19-,0000
,( /ebit balan'e of !1-,000
+( Credit balan'e of !1-,000
C( Credit balan'e of !-,000
/( /ebit balan'e of !-,000

20( +ased on the pre'edin& infor$ation, what a$ount of &oodwill will be reported if the
a'1uisition pri'e was !19-,0000
,( !0
+( !40,000
C( !1-,000
/( !"-,000

West, >n'( holds 100 per'ent of the 'o$$on sto' of Coast Co$pany, an in)est$ent
a'1uired for !580,000( >$$ediately followin& the 'o$bination, West%s net assets ha)e a boo
)alue of !1,1-0,000 and a fair )alue of !1,"90,000( #he boo )alue and the fair )alue of
Coast%s net assets on the date of 'o$bination are !400,000 and !--0,000, respe'ti)ely(
>$$ediately followin& the 'o$bination, a 'onsolidated balan'e sheet is prepared(

21( +ased on the infor$ation &i)en abo)e, what will be the a$ount of net assets reported in
the 'onsolidated balan'e sheet, prepared i$$ediately followin& the 'o$bination0
,( !1,1-0,000
+( !1,--0,000
C( !1,.00,000
/( !1,8"0,000

22( +ased on the infor$ation &i)en abo)e, &oodwill will be reported in the 'onsolidated
balan'e sheet in the a$ount of*
,( !240,000(
+( !1"0,000(
C( !1-0,000(
/( !2.0,000(

4-9
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
2"( +ased on the infor$ation &i)en abo)e, what will be the a$ount of total 'onsolidated
sto'holders% e1uity be reported in the 'onsolidated balan'e sheet prepared i$$ediately
followin& the 'o$bination0
,( !1,"90,000
+( !1,--0,000
C( !1,.00,000
/( !1,1-0,000

24( +ased on the infor$ation &i)en abo)e, at what a$ount will West%s in)est$ent in Coast
sto' be reported in the 'onsolidated balan'e sheet0
,( !0
+( !400,000
C( !440,000
/( !480,000

4-10
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
On January 1, 2009, Wilton Co$pany a'1uired all of Sirius Co$pany%s 'o$$on shares, for
!"5-,000 'ash( On that date, Sirius%s balan'e sheet appeared as follows*

#he fair )alues of all of Sirius%s assets and liabilities were e1ual to their boo )alues e4'ept
for in)entory that had a fair )alue of !8-,000, land that had a fair )alue of !50,000, and
buildin&s and e1uip$ent that had a fair )alue of !2-0,000( +uildin&s and e1uip$ent ha)e a
re$ainin& useful life of 10 years with :ero sal)a&e )alue( Wilton Co$pany de'ided to e$ploy
push-down a''ountin& for the a'1uisition( Subse1uent to the 'o$bination, Sirius 'ontinued to
operate as a separate 'o$pany(

2-( +ased on the pre'edin& infor$ation, what a$ount will be present in the re)aluation
'apital a''ount, when eli$inatin& entries are prepared0
,( !0
+( !5-,000
C( !50,000
/( !1-,000

4-11
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
25( +ased on the pre'edin& infor$ation, what a$ount of differential will arise in the
'onsolidation pro'ess0
,( !0
+( !-,000
C( !1-,000
/( !5-,000

2.( +ased on the pre'edin& infor$ation, the write-up of buildin&s and e1uip$ent will*
,( in'rease Sirius%s reported net in'o$e for 2009 by !-,000(
+( de'rease Sirius%s reported net in'o$e for 2009 by !-,000(
C( in'rease Sirius%s reported net in'o$e for 2009 by !-0,000(
/( ha)e no affe't on Sirius%s reported net in'o$e for 2009(

4-12
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
Lea Co$pany a'1uired all of #en:in& Corporation%s sto' on January 1, 2005 for !1-0,000
'ash( On /e'e$ber "1, 2008, the trial balan'es of the two 'o$panies were as follows*

#en:in& Corporation reported retained earnin&s of !.-,000 at the date of a'1uisition( #he
differen'e between the a'1uisition pri'e and underlyin& boo )alue is assi&ned to buildin&s
and e1uip$ent with a re$ainin& e'ono$i' life of fi)e years fro$ the date of a'1uisition( ,t
/e'e$ber "1, 2008, #en:in& owed Lea !4,000 for ser)i'es pro)ided(

4-1"
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
28( +ased on the pre'edin& infor$ation, all of the followin& are eli$inatin& entries re1uired
on /e'e$ber "1, 2008, to prepare 'onsolidated finan'ial state$ents, e4'ept*

,( Option ,
+( Option +
C( Option C
/( Option /

29( +ased on the pre'edin& infor$ation, what a$ount will be reported as total assets in the
'onsolidated balan'e sheet for 20080
,( !555,000
+( !.4.,000
C( !5-1,000
/( !945,000

"0( +ased on the pre'edin& infor$ation, what a$ount will be reported for total a''ounts
payable in the 'onsolidated balan'e sheet for the year 20080
,( !-5,000
+( !45,000
C( !50,000
/( !42,000

4-14
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
"1( +ased on the pre'edin& infor$ation, what a$ount of total liabilities will be reported in the
'onsolidated balan'e sheet for 20080
,( !22-,000
+( !221,000
C( !21.,000
/( !1".,000

"2( +ased on the pre'edin& infor$ation, what a$ount of total retained earnin&s will be
reported in the 'onsolidated balan'e sheet for the year 20080
,( !""0,000
+( !4-0,000
C( !4"0,000
/( !".0,000

""( #anner Co$pany, a subsidiary a'1uired for 'ash, owned e1uip$ent with a fair )alue
hi&her than the boo )alue as of the date of 'o$bination( , 'onsolidated balan'e sheet
prepared i$$ediately after the a'1uisition would in'lude this differen'e in*
,( &oodwill(
+( retained earnin&s(
C( deferred 'har&es(
/( e1uip$ent(

"4( Whi'h ter$ refers to the pra'ti'e of re)aluin& an a'1uired subsidiary%s assets and
liabilities to their fair )alues dire'tly on that subsidiary%s boos at the date of a'1uisition0
,( ;air )alue a''ountin&
+( <ush-down a''ountin&
C( ;ully ad3usted $ethod
/( ?e'ipro'al ownership

4-1-
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
"-( Whi'h of the followin& obser)ations is @O# 'onsistent with the use of push-down
a''ountin&0
,( #he re)aluation 'apital a''ount is part of the subsidiary%s sto'holders% e1uity(
+( @o differential arises in the 'onsolidation pro'ess(
C( ?e)aluation Capital a''ount is eli$inated in preparin& 'onsolidated state$ents(
/( 9li$inatin& entries related to the differential are needed in the worpapers(

"5( When 'o$panies e$ploy push-down a''ountin&*
,( the 'onsolidated finan'ial state$ents will appear e4a'tly as if push-down a''ountin& had
not been used(
+( a spe'ial a''ount 'alled ?e)aluation Capital will appear in the 'onsolidated balan'e sheet(
C( all 'onsolidation eli$ination entries are $ade on the boos of the subsidiary rather than in
'onsolidated worpapers(
/( it $eans that the subsidiary is not substantially wholly owned by the parent(

".( Whi'h of the followin& help e4plain the differen'es between the total debit and 'redit
balan'es appearin& on the balan'e sheet and those that appear in the worpaper0
,( Contra asset a''ounts
+( >n)est$ent balan'es
C( <ush-down a''ountin&
/( ?eportin& $ethods

"8( Co$pany A a'1uires 100 per'ent of the )otin& shares of Co$pany B for !2.-,000 on
/e'e$ber "1, 2008( #he fair )alue of the net assets of Co$pany A at the date of a'1uisition
was !"00,000( #his is an e4a$ple of a6n7*
,( positi)e differential(
+( bar&ain pur'hase(
C( e4traordinary loss(
/( re)aluation ad3ust$ent(

4-15
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
"9( What portion of the balan'es of subsidiary sto'holders% e1uity a''ounts are eli$inated in
preparin& the 'onsolidated balan'e sheet0
,( Co$$on sto'
+( ,dditional paid-in 'apital
C( ?etained 9arnin&s
/( ,ll of the balan'es are eli$inated

40( Whi'h of the followin& obser)ations is @O# true0
,( #he differential a''ount is a 'learin& a''ount(
+( , 'learin& a''ount 'an redu'e the 'han'e of error in preparin& 'onsolidated state$ents(
C( 9li$inatin& entries re$o)e the balan'e in the in)est$ent a''ount fro$ the parent%s boos(
/( #he differential 'ontinues to be a part of the in)est$ent a''ount balan'e until fully
a$orti:ed(

41( Consolidated finan'ial state$ents are bein& prepared for +ehe$oth Corporation and its
two wholly-owned subsidiaries that ha)e inter'o$pany loans of !-0,000 and inter'o$pany
profits of !100,000( Cow $u'h of these inter'o$pany loans and profits should be
eli$inated0
,( inter'o$pany loans - !0D inter'o$pany profits - !0
+( inter'o$pany loans - !-0,000D inter'o$pany profits - !0
C( inter'o$pany loans - !-0,000D inter'o$pany profits - !100,000
/( inter'o$pany loans - !0D inter'o$pany profits - !100,000

4-1.
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
On January 1, 2008, Chariot Co$pany a'1uired 100 per'ent of Stryder Co$pany for
!220,000 'ash( #he trial balan'es for the two 'o$panies on /e'e$ber "1, 2008, in'luded the
followin& a$ounts*

On the a'1uisition date, Stryder reported net assets with a boo )alue of !1.0,000( , total of
!10,000 of the a'1uisition pri'e is applied to &oodwill, whi'h was not i$paired in 2008(
Stryder%s depre'iable assets had an esti$ated e'ono$i' life of 10 years on the date of
'o$bination( #he differen'e between fair )alue and boo )alue of tan&ible assets is related
entirely to buildin&s and e1uip$ent( Chariot used the e1uity $ethod in a''ountin& for its
in)est$ent in Stryder( ,nalysis of re'ei)ables and payables re)ealed that Stryder owed
Chariot !10,000 on /e'e$ber "1, 2008(

4-18
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
42( +ased on the infor$ation pro)ided, the differential asso'iated with this a'1uisition is*
,( !"5,000(
+( !40,000(
C( !10,000(
/( !-0,000(

4"( +ased on the infor$ation pro)ided, the be&innin& differential assi&ned to buildin&s and
e1uip$ent is*
,( !-0,000(
+( !40,000(
C( !10,000(
/( !"5,000(

44( +ased on the infor$ation pro)ided, the a$ount of differential assi&ned to buildin&s and
e1uip$ent that is a$orti:ed for the year is*
,( !-,000(
+( !4,000(
C( !10,000(
/( !",500(

4-( +ased on the infor$ation pro)ided, what a$ount of retained earnin&s will be reported in
the 'onsolidated finan'ial state$ents for the year0
,( !""1,000
+( !110,000
C( !441,000
/( !4-5,000

45( +ased on the infor$ation pro)ided, what a$ount of net in'o$e will be reported in the
'onsolidated finan'ial state$ents for the year0
,( !225,000
+( !--,000
C( !2"0,000
/( !1.1,000

4-19
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
4.( +ased on the infor$ation pro)ided, what a$ount of total assets will be reported in the
'onsolidated balan'e sheet for the year0
,( !89-,000
+( !801,000
C( !.2",000
/( !1,111,000


Essay Questions

48( <a'o Co$pany a'1uired 100 per'ent of the sto' of Earland Corp( on /e'e$ber "1, 2008(
#he sto'holder%s e1uity se'tion of Earland%s balan'e sheet at that date is as follows*


<a'o finan'ed the a'1uisition by usin& !880,000 'ash and &i)in& a note payable for !400,000(
+oo )alue appro4i$ated fair )alue for all of Earland%s assets and liabilities e4'ept for
buildin&s whi'h had a fair )alue !50,000 $ore than its boo )alue and a re$ainin& useful life
of 10 years( ,ny re$ainin& differential was related to &oodwill( <a'o has an a''ount payable
to Earland in the a$ount of !"0,000(
?e1uired*
17 <resent all eli$inatin& entries needed to prepare a 'onsolidated balan'e sheet i$$ediately
followin& the a'1uisition(
27 What additional eli$inatin& entry $ust be prepared at /e'e$ber "1, 20090




4-20
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
49( /ear Corporation a'1uired 100 per'ent of the )otin& shares of #herry >n'( by issuin&
10,000 new shares of !- par )alue 'o$$on sto' with a !"0 $aret )alue(

?e1uired*
17 Whi'h 'o$pany is the parent and whi'h is the subsidiary0
27 /efine a subsidiary 'orporation(
"7 /efine a parent 'orporation(
47 Whi'h entity prepares 'onsolidated worpapers0
-7 Why are eli$ination entries used0




4-21
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
-0( On /e'e$ber "1, 2009, #hessaly Corporation a'1uired all of >onian Co$pany%s 'o$$on
shares, for !-.0,000 'ash( On that date, >onian%s balan'e sheet appeared as follows*


#he fair )alues of all of >onian%s assets and liabilities were e1ual to their boo )alues e4'ept
for the followin&*

?e1uired*
17 ?e'ord the a'1uisition of >onian%s sto' on #hessaly%s boos on /e'e$ber "1, 2009(
27 ?e'ord any entries that would be $ade on /e'e$ber "1, 2009, on >onian%s boos related to
the business 'o$bination if push-down a''ountin& is e$ployed(
"7 <resent all eli$inatin& entries that would appear in the worpaper to prepare a 'onsolidated
balan'e sheet i$$ediately after the 'o$bination(




4-22
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
-1( On January 1, 2009, Fi&$a Corporation a'1uired 100 per'ent of Standard Co$pany%s
'o$$on shares at underlyin& boo )alue( Fi&$a uses the e1uity $ethod in a''ountin& for its
ownership of Standard( On /e'e$ber "1, 2009, the trial balan'es of the two 'o$panies are as
follows*


?e1uired*
<repare the eli$inatin& entries needed as of /e'e$ber "1, 2009, to 'o$plete a 'onsolidation
worpaper(

<repare a three-part 'onsolidation worpaper as of /e'e$ber "1, 2009(




4-2"
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
-2( Lea Co$pany a'1uired all of #en:in& Corporation%s sto' on January 1, 2005 for
!1-0,000 'ash( On /e'e$ber "1, 200., the balan'e sheets of the two 'o$panies showed the
followin& a$ounts*

#en:in& Corporation reported retained earnin&s of !.-,000 at the date of a'1uisition( #he
differen'e between the a'1uisition pri'e and underlyin& boo )alue is assi&ned to buildin&s
and e1uip$ent with a re$ainin& e'ono$i' life of fi)e years fro$ the date of a'1uisition(
?e1uired*
17 Ei)e the appropriate eli$inatin& entry or entries needed to prepare a 'onsolidated balan'e
sheet as of /e'e$ber "1, 200.(
27 <repare a 'onsolidated balan'e sheet worpaper as of /e'e$ber "1, 200.(




4-24
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
Chapter 04 Consolidation of Wholly Owned Subsidiaries ,nswer Gey


Multiple Choice Questions

On July 1, 2009, Lin Corporation paid !"40,000 for all of #insel Co$pany%s outstandin&
'o$$on sto'( On that date, the 'osts and fair )alues of #insel%s re'orded assets and liabilities
were as follows*


1( +ased on the pre'edin& infor$ation, the differential refle'ted in a 'onsolidation worpaper
to prepare a 'onsolidated balan'e sheet i$$ediately after the business 'o$bination is*
,( !0(
+( !2-,000(
C. !.0,000(
/( !4-,000(

AACSB: Analytic
AICPA: Measurement

4-2-
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
2( +ased on the pre'edin& infor$ation, what a$ount should be allo'ated to &oodwill in the
'onsolidated balan'e sheet, prepared after this business 'o$bination0
,( !0
B. !2-,000
C( !.0,000
/( !4-,000

AACSB: Analytic
AICPA: Measurement

On /e'e$ber "1, 2009, ,dd-On Co$pany a'1uired 100 per'ent of 2enus Corporation%s
'o$$on sto' for !"00,000( +alan'e sheet infor$ation 2enus 3ust prior to the a'1uisition is
&i)en here*

,t the date of the business 'o$bination, 2enus%s net assets and liabilities appro4i$ated fair
)alue e4'ept for in)entory, whi'h had a fair )alue of !50,000, land whi'h had a fair )alue of
!12-,000, and buildin&s and e1uip$ent 6net7, whi'h had a fair )alue of !2-0,000(

4-25
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
"( +ased on the infor$ation pro)ided, what a$ount of in)entory will be in'luded in the
'onsolidated balan'e sheet i$$ediately followin& the a'1uisition0
A. !50,000
+( !.-,000
C( !1-,000
/( !4-,000

AACSB: Analytic
AICPA: Measurement

4( +ased on the infor$ation pro)ided, what a$ount of &oodwill will be in'luded in the
'onsolidated balan'e sheet i$$ediately followin& the a'1uisition0
,( !"0,000
+( !1-,000
C( !8-,000
. !4-,000

AACSB: Analytic
AICPA: Measurement

-( +ased on the infor$ation pro)ided, what a$ount of differential will be refle'ted in a
'onsolidation worpaper to prepare a 'onsolidated balan'e sheet i$$ediately after the
business 'o$bination0
,( !0
+( !4-,000
C( !1-,000
. !8-,000

AACSB: Analytic
AICPA: Measurement

4-2.
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
5( +ased on the infor$ation pro)ided, what a$ount will be in'luded as in)est$ent in 2enus
Corporation in the 'onsolidated balan'e sheet i$$ediately followin& the a'1uisition0
A. !0
+( !"9-,000
C( !2--,000
/( !"00,000

AACSB: Analytic
AICPA: Measurement

9nya Corporation a'1uired 100 per'ent of Celti' Corporation%s 'o$$on sto' on January 1,
2009( Su$$ari:ed balan'e sheet infor$ation for the two 'o$panies i$$ediately after the
'o$bination is pro)ided*


4-28
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
.( +ased on the pre'edin& infor$ation, the a$ount of differential asso'iated with the
a'1uisition is*
,( !0(
B. !-8,000(
C( !22,000(
/( !"5,000(

AACSB: Analytic
AICPA: Measurement

8( +ased on the infor$ation pro)ided, the 'onsolidated balan'e sheet of 9nya and Celti' will
refle't &oodwill in the a$ount of*
,( !0(
+( !-8,000(
C. !22,000(
/( !"5,000(

AACSB: Analytic
AICPA: Measurement

4-29
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
9( On January 1, 2008, +lae Co$pany a'1uired all of ;rost Corporation%s )otin& shares for
!280,000 'ash( On /e'e$ber "1, 2009, ;rost owed +lae !-,000 for ser)i'es pro)ided durin&
the year( When 'onsolidated finan'ial state$ents are prepared for 2009, whi'h entry is needed
to eli$inate inter'o$pany re'ei)ables and payables in the 'onsolidation worpaper0

A. Option ,
+( Option +
C( Option C
/( Option /

AACSB: Analytic
AICPA: Measurement

4-"0
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
<a'e Corporation a'1uired 100 per'ent of Spin Co$pany%s 'o$$on sto' on January 1,
2009( +alan'e sheet data for the two 'o$panies i$$ediately followin& the a'1uisition follow*

,t the date of the business 'o$bination, the boo )alues of Spin%s net assets and liabilities
appro4i$ated fair )alue e4'ept for in)entory, whi'h had a fair )alue of !50,000, and land,
whi'h had a fair )alue of !-0,000( #he fair )alue of land for <a'e Corporation was esti$ated
at !80,000 i$$ediately prior to the a'1uisition(

10( +ased on the pre'edin& infor$ation, at what a$ount should total land be reported in the
'onsolidated balan'e sheet prepared i$$ediately after the business 'o$bination0
,( !1"0,000
+( !10-,000
C. !11-,000
/( !120,000

AACSB: Analytic
AICPA: Measurement

4-"1
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
11( +ased on the pre'edin& infor$ation, what a$ount of total assets will appear in the
'onsolidated balan'e sheet prepared i$$ediately after the business 'o$bination0
A. !.-5,000
+( !."-,000
C( !.-0,000
/( !542,000

AACSB: Analytic
AICPA: Measurement

12( +ased on the pre'edin& infor$ation, what is the differential asso'iated with the
a'1uisition0
,( !1-,000
B. !21,000
C( !5,000
/( !10,000

AACSB: Analytic
AICPA: Measurement

1"( +ased on the pre'edin& infor$ation, what a$ount of &oodwill will be reported in the
'onsolidated balan'e sheet prepared i$$ediately after the business 'o$bination0
,( !0
+( !21,000
C. !5,000
/( !1-,000

AACSB: Analytic
AICPA: Measurement

4-"2
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
14( +ased on the pre'edin& infor$ation, what a$ount of liabilities will be reported in the
'onsolidated balan'e sheet prepared i$$ediately after the business 'o$bination0
,( !51-,000
B. !405,000
C( !"00,000
/( !25-,000

AACSB: Analytic
AICPA: Measurement

1-( +ased on the pre'edin& infor$ation, what a$ount of retained earnin&s will be reported in
the 'onsolidated balan'e sheet prepared i$$ediately after the business 'o$bination0
A. !"00,000
+( !409,000
C( !2-9,000
/( !191,000

AACSB: Analytic
AICPA: Measurement

15( +ased on the pre'edin& infor$ation, what a$ount of total sto'holder%s e1uity will be
reported in the 'onsolidated balan'e sheet prepared i$$ediately after the business
'o$bination0
,( !"00,000
+( !4.9,000
C( !"1-,000
. !"-0,000

AACSB: Analytic
AICPA: Measurement

On /e'e$ber "1, 2008, =er'ury Corporation a'1uired 100 per'ent ownership of Saturn
Corporation( On that date, Saturn reported assets and liabilities with boo )alues of !"00,000
and !100,000, respe'ti)ely, 'o$$on sto' outstandin& of !-0,000, and retained earnin&s of
!1-0,000( #he boo )alues and fair )alues of Saturn%s assets and liabilities were identi'al
e4'ept for land whi'h had in'reased in )alue by !10,000 and in)entories whi'h had de'reased
by !-,000(

4-""
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
1.( +ased on the pre'edin& infor$ation, what a$ount of differential will appear in the
eli$inatin& entries re1uired to prepare a 'onsolidated balan'e sheet i$$ediately after the
business 'o$bination, if the a'1uisition pri'e was !240,0000
,( !0
B. !40,000
C( !2-,000
/( !-,000

AACSB: Analytic
AICPA: Measurement

18( +ased on the pre'edin& infor$ation, what a$ount of &oodwill will be reported if the
a'1uisition pri'e was !240,0000
,( !0
+( !40,000
C( !1-,000
. !"-,000

AACSB: Analytic
AICPA: Measurement

19( +ased on the pre'edin& infor$ation, whi'h of the followin& will pertain to the differential
that will appear in the eli$inatin& entries re1uired to prepare a 'onsolidated balan'e sheet
i$$ediately after the business 'o$bination, if the a'1uisition pri'e was !19-,0000
,( /ebit balan'e of !1-,000
+( Credit balan'e of !1-,000
C( Credit balan'e of !-,000
. /ebit balan'e of !-,000

AACSB: Analytic
AICPA: Measurement

4-"4
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
20( +ased on the pre'edin& infor$ation, what a$ount of &oodwill will be reported if the
a'1uisition pri'e was !19-,0000
A. !0
+( !40,000
C( !1-,000
/( !"-,000

AACSB: Analytic
AICPA: Measurement

West, >n'( holds 100 per'ent of the 'o$$on sto' of Coast Co$pany, an in)est$ent
a'1uired for !580,000( >$$ediately followin& the 'o$bination, West%s net assets ha)e a boo
)alue of !1,1-0,000 and a fair )alue of !1,"90,000( #he boo )alue and the fair )alue of
Coast%s net assets on the date of 'o$bination are !400,000 and !--0,000, respe'ti)ely(
>$$ediately followin& the 'o$bination, a 'onsolidated balan'e sheet is prepared(

21( +ased on the infor$ation &i)en abo)e, what will be the a$ount of net assets reported in
the 'onsolidated balan'e sheet, prepared i$$ediately followin& the 'o$bination0
A. !1,1-0,000
+( !1,--0,000
C( !1,.00,000
/( !1,8"0,000

AACSB: Analytic
AICPA: Measurement

22( +ased on the infor$ation &i)en abo)e, &oodwill will be reported in the 'onsolidated
balan'e sheet in the a$ount of*
,( !240,000(
B. !1"0,000(
C( !1-0,000(
/( !2.0,000(

AACSB: Analytic
AICPA: Measurement

4-"-
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
2"( +ased on the infor$ation &i)en abo)e, what will be the a$ount of total 'onsolidated
sto'holders% e1uity be reported in the 'onsolidated balan'e sheet prepared i$$ediately
followin& the 'o$bination0
,( !1,"90,000
+( !1,--0,000
C( !1,.00,000
. !1,1-0,000

AACSB: Analytic
AICPA: Measurement

24( +ased on the infor$ation &i)en abo)e, at what a$ount will West%s in)est$ent in Coast
sto' be reported in the 'onsolidated balan'e sheet0
A. !0
+( !400,000
C( !440,000
/( !480,000

AACSB: Analytic
AICPA: Measurement

4-"5
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
On January 1, 2009, Wilton Co$pany a'1uired all of Sirius Co$pany%s 'o$$on shares, for
!"5-,000 'ash( On that date, Sirius%s balan'e sheet appeared as follows*

#he fair )alues of all of Sirius%s assets and liabilities were e1ual to their boo )alues e4'ept
for in)entory that had a fair )alue of !8-,000, land that had a fair )alue of !50,000, and
buildin&s and e1uip$ent that had a fair )alue of !2-0,000( +uildin&s and e1uip$ent ha)e a
re$ainin& useful life of 10 years with :ero sal)a&e )alue( Wilton Co$pany de'ided to e$ploy
push-down a''ountin& for the a'1uisition( Subse1uent to the 'o$bination, Sirius 'ontinued to
operate as a separate 'o$pany(

2-( +ased on the pre'edin& infor$ation, what a$ount will be present in the re)aluation
'apital a''ount, when eli$inatin& entries are prepared0
,( !0
B. !5-,000
C( !50,000
/( !1-,000

AACSB: Analytic
AICPA: Measurement

4-".
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
25( +ased on the pre'edin& infor$ation, what a$ount of differential will arise in the
'onsolidation pro'ess0
A. !0
+( !-,000
C( !1-,000
/( !5-,000

AACSB: Analytic
AICPA: Measurement

2.( +ased on the pre'edin& infor$ation, the write-up of buildin&s and e1uip$ent will*
,( in'rease Sirius%s reported net in'o$e for 2009 by !-,000(
B. de'rease Sirius%s reported net in'o$e for 2009 by !-,000(
C( in'rease Sirius%s reported net in'o$e for 2009 by !-0,000(
/( ha)e no affe't on Sirius%s reported net in'o$e for 2009(

AACSB: Analytic
AICPA: Measurement

4-"8
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
Lea Co$pany a'1uired all of #en:in& Corporation%s sto' on January 1, 2005 for !1-0,000
'ash( On /e'e$ber "1, 2008, the trial balan'es of the two 'o$panies were as follows*

#en:in& Corporation reported retained earnin&s of !.-,000 at the date of a'1uisition( #he
differen'e between the a'1uisition pri'e and underlyin& boo )alue is assi&ned to buildin&s
and e1uip$ent with a re$ainin& e'ono$i' life of fi)e years fro$ the date of a'1uisition( ,t
/e'e$ber "1, 2008, #en:in& owed Lea !4,000 for ser)i'es pro)ided(

4-"9
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
28( +ased on the pre'edin& infor$ation, all of the followin& are eli$inatin& entries re1uired
on /e'e$ber "1, 2008, to prepare 'onsolidated finan'ial state$ents, e4'ept*

A. Option ,
+( Option +
C( Option C
/( Option /

AACSB: Analytic
AICPA: Measurement

29( +ased on the pre'edin& infor$ation, what a$ount will be reported as total assets in the
'onsolidated balan'e sheet for 20080
,( !555,000
+( !.4.,000
C. !5-1,000
/( !945,000

AACSB: Analytic
AICPA: Measurement

4-40
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
"0( +ased on the pre'edin& infor$ation, what a$ount will be reported for total a''ounts
payable in the 'onsolidated balan'e sheet for the year 20080
A. !-5,000
+( !45,000
C( !50,000
/( !42,000

AACSB: Analytic
AICPA: Measurement

"1( +ased on the pre'edin& infor$ation, what a$ount of total liabilities will be reported in the
'onsolidated balan'e sheet for 20080
,( !22-,000
B. !221,000
C( !21.,000
/( !1".,000

AACSB: Analytic
AICPA: Measurement

"2( +ased on the pre'edin& infor$ation, what a$ount of total retained earnin&s will be
reported in the 'onsolidated balan'e sheet for the year 20080
A. !""0,000
+( !4-0,000
C( !4"0,000
/( !".0,000

AACSB: Analytic
AICPA: Measurement

4-41
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
""( #anner Co$pany, a subsidiary a'1uired for 'ash, owned e1uip$ent with a fair )alue
hi&her than the boo )alue as of the date of 'o$bination( , 'onsolidated balan'e sheet
prepared i$$ediately after the a'1uisition would in'lude this differen'e in*
,( &oodwill(
+( retained earnin&s(
C( deferred 'har&es(
. e1uip$ent(

AACSB: Reflective Thinking
AICPA: Reporting

"4( Whi'h ter$ refers to the pra'ti'e of re)aluin& an a'1uired subsidiary%s assets and
liabilities to their fair )alues dire'tly on that subsidiary%s boos at the date of a'1uisition0
,( ;air )alue a''ountin&
B. <ush-down a''ountin&
C( ;ully ad3usted $ethod
/( ?e'ipro'al ownership

AACSB: Reflective Thinking
AICPA: Reporting

"-( Whi'h of the followin& obser)ations is @O# 'onsistent with the use of push-down
a''ountin&0
,( #he re)aluation 'apital a''ount is part of the subsidiary%s sto'holders% e1uity(
+( @o differential arises in the 'onsolidation pro'ess(
C( ?e)aluation Capital a''ount is eli$inated in preparin& 'onsolidated state$ents(
. 9li$inatin& entries related to the differential are needed in the worpapers(

AACSB: Reflective Thinking
AICPA: Reporting

4-42
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
"5( When 'o$panies e$ploy push-down a''ountin&*
A. the 'onsolidated finan'ial state$ents will appear e4a'tly as if push-down a''ountin& had
not been used(
+( a spe'ial a''ount 'alled ?e)aluation Capital will appear in the 'onsolidated balan'e sheet(
C( all 'onsolidation eli$ination entries are $ade on the boos of the subsidiary rather than in
'onsolidated worpapers(
/( it $eans that the subsidiary is not substantially wholly owned by the parent(

AACSB: Reflective Thinking
AICPA: Decision Making

".( Whi'h of the followin& help e4plain the differen'es between the total debit and 'redit
balan'es appearin& on the balan'e sheet and those that appear in the worpaper0
A. Contra asset a''ounts
+( >n)est$ent balan'es
C( <ush-down a''ountin&
/( ?eportin& $ethods

AACSB: Reflective Thinking
AICPA: Decision Making

"8( Co$pany A a'1uires 100 per'ent of the )otin& shares of Co$pany B for !2.-,000 on
/e'e$ber "1, 2008( #he fair )alue of the net assets of Co$pany A at the date of a'1uisition
was !"00,000( #his is an e4a$ple of a6n7*
,( positi)e differential(
B. bar&ain pur'hase(
C( e4traordinary loss(
/( re)aluation ad3ust$ent(

AACSB: Reflective Thinking
AICPA: Decision Making

4-4"
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
"9( What portion of the balan'es of subsidiary sto'holders% e1uity a''ounts are eli$inated in
preparin& the 'onsolidated balan'e sheet0
,( Co$$on sto'
+( ,dditional paid-in 'apital
C( ?etained 9arnin&s
. ,ll of the balan'es are eli$inated

AACSB: Reflective Thinking
AICPA: Decision Making

40( Whi'h of the followin& obser)ations is @O# true0
,( #he differential a''ount is a 'learin& a''ount(
+( , 'learin& a''ount 'an redu'e the 'han'e of error in preparin& 'onsolidated state$ents(
C. 9li$inatin& entries re$o)e the balan'e in the in)est$ent a''ount fro$ the parent%s boos(
/( #he differential 'ontinues to be a part of the in)est$ent a''ount balan'e until fully
a$orti:ed(

AACSB: Reflective Thinking
AICPA: Decision Making

41( Consolidated finan'ial state$ents are bein& prepared for +ehe$oth Corporation and its
two wholly-owned subsidiaries that ha)e inter'o$pany loans of !-0,000 and inter'o$pany
profits of !100,000( Cow $u'h of these inter'o$pany loans and profits should be
eli$inated0
,( inter'o$pany loans - !0D inter'o$pany profits - !0
+( inter'o$pany loans - !-0,000D inter'o$pany profits - !0
C. inter'o$pany loans - !-0,000D inter'o$pany profits - !100,000
/( inter'o$pany loans - !0D inter'o$pany profits - !100,000

AACSB: Reflective Thinking
AICPA: Decision Making

4-44
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
On January 1, 2008, Chariot Co$pany a'1uired 100 per'ent of Stryder Co$pany for
!220,000 'ash( #he trial balan'es for the two 'o$panies on /e'e$ber "1, 2008, in'luded the
followin& a$ounts*

On the a'1uisition date, Stryder reported net assets with a boo )alue of !1.0,000( , total of
!10,000 of the a'1uisition pri'e is applied to &oodwill, whi'h was not i$paired in 2008(
Stryder%s depre'iable assets had an esti$ated e'ono$i' life of 10 years on the date of
'o$bination( #he differen'e between fair )alue and boo )alue of tan&ible assets is related
entirely to buildin&s and e1uip$ent( Chariot used the e1uity $ethod in a''ountin& for its
in)est$ent in Stryder( ,nalysis of re'ei)ables and payables re)ealed that Stryder owed
Chariot !10,000 on /e'e$ber "1, 2008(

4-4-
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
42( +ased on the infor$ation pro)ided, the differential asso'iated with this a'1uisition is*
,( !"5,000(
+( !40,000(
C( !10,000(
. !-0,000(

AACSB: Analytic
AICPA: Measurement

4"( +ased on the infor$ation pro)ided, the be&innin& differential assi&ned to buildin&s and
e1uip$ent is*
,( !-0,000(
B. !40,000(
C( !10,000(
/( !"5,000(

AACSB: Analytic
AICPA: Measurement

44( +ased on the infor$ation pro)ided, the a$ount of differential assi&ned to buildin&s and
e1uip$ent that is a$orti:ed for the year is*
,( !-,000(
B. !4,000(
C( !10,000(
/( !",500(

AACSB: Analytic
AICPA: Measurement

4-45
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
4-( +ased on the infor$ation pro)ided, what a$ount of retained earnin&s will be reported in
the 'onsolidated finan'ial state$ents for the year0
A. !""1,000
+( !110,000
C( !441,000
/( !4-5,000

AACSB: Analytic
AICPA: Measurement

45( +ased on the infor$ation pro)ided, what a$ount of net in'o$e will be reported in the
'onsolidated finan'ial state$ents for the year0
,( !225,000
+( !--,000
C( !2"0,000
. !1.1,000

AACSB: Analytic
AICPA: Measurement

4.( +ased on the infor$ation pro)ided, what a$ount of total assets will be reported in the
'onsolidated balan'e sheet for the year0
,( !89-,000
+( !801,000
C. !.2",000
/( !1,111,000

AACSB: Analytic
AICPA: Measurement


Essay Questions

4-4.
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
48( <a'o Co$pany a'1uired 100 per'ent of the sto' of Earland Corp( on /e'e$ber "1, 2008(
#he sto'holder%s e1uity se'tion of Earland%s balan'e sheet at that date is as follows*


<a'o finan'ed the a'1uisition by usin& !880,000 'ash and &i)in& a note payable for !400,000(
+oo )alue appro4i$ated fair )alue for all of Earland%s assets and liabilities e4'ept for
buildin&s whi'h had a fair )alue !50,000 $ore than its boo )alue and a re$ainin& useful life
of 10 years( ,ny re$ainin& differential was related to &oodwill( <a'o has an a''ount payable
to Earland in the a$ount of !"0,000(
?e1uired*
17 <resent all eli$inatin& entries needed to prepare a 'onsolidated balan'e sheet i$$ediately
followin& the a'1uisition(
27 What additional eli$inatin& entry $ust be prepared at /e'e$ber "1, 20090
17

27 ,s of /e'e$ber "1, 2009 there is a need for a /epre'iation eli$ination entry(


4-48
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
AACSB: Analytic
AICPA: Measurement

49( /ear Corporation a'1uired 100 per'ent of the )otin& shares of #herry >n'( by issuin&
10,000 new shares of !- par )alue 'o$$on sto' with a !"0 $aret )alue(

?e1uired*
17 Whi'h 'o$pany is the parent and whi'h is the subsidiary0
27 /efine a subsidiary 'orporation(
"7 /efine a parent 'orporation(
47 Whi'h entity prepares 'onsolidated worpapers0
-7 Why are eli$ination entries used0
17 /ear is the parent and #herry is the subsidiary(
27 , subsidiary is an entity in whi'h another entity, the parent 'o$pany, holds a 'ontrollin&
finan'ial interest(
"7 , parent 'o$pany holds a 'ontrollin& finan'ial interest in another 'o$pany(
47 #he parent, /ear, prepares the 'onsolidated worpapers(
-7 9li$ination entries are used to ad3ust the a$ounts reported by the parent and all of the
subsidiaries to refle't the a$ounts that would be reported if the separate le&al entities were a
sin&le 'o$pany(

AACSB: Reflective Thinking
AICPA: Decision Making

4-49
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
-0( On /e'e$ber "1, 2009, #hessaly Corporation a'1uired all of >onian Co$pany%s 'o$$on
shares, for !-.0,000 'ash( On that date, >onian%s balan'e sheet appeared as follows*


#he fair )alues of all of >onian%s assets and liabilities were e1ual to their boo )alues e4'ept
for the followin&*

?e1uired*
17 ?e'ord the a'1uisition of >onian%s sto' on #hessaly%s boos on /e'e$ber "1, 2009(
27 ?e'ord any entries that would be $ade on /e'e$ber "1, 2009, on >onian%s boos related to
the business 'o$bination if push-down a''ountin& is e$ployed(
"7 <resent all eli$inatin& entries that would appear in the worpaper to prepare a 'onsolidated
balan'e sheet i$$ediately after the 'o$bination(
4--0
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
17

27

"7


AACSB: Analytic
AICPA: Measurement

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Chapter 04 - Consolidation of Wholly Owned Subsidiaries
-1( On January 1, 2009, Fi&$a Corporation a'1uired 100 per'ent of Standard Co$pany%s
'o$$on shares at underlyin& boo )alue( Fi&$a uses the e1uity $ethod in a''ountin& for its
ownership of Standard( On /e'e$ber "1, 2009, the trial balan'es of the two 'o$panies are as
follows*


?e1uired*
<repare the eli$inatin& entries needed as of /e'e$ber "1, 2009, to 'o$plete a 'onsolidation
worpaper(

<repare a three-part 'onsolidation worpaper as of /e'e$ber "1, 2009(
4--2
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
1(

2(
4--"
Chapter 04 - Consolidation of Wholly Owned Subsidiaries


AACSB: Analytic
AICPA: Measurement

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Chapter 04 - Consolidation of Wholly Owned Subsidiaries
-2( Lea Co$pany a'1uired all of #en:in& Corporation%s sto' on January 1, 2005 for
!1-0,000 'ash( On /e'e$ber "1, 200., the balan'e sheets of the two 'o$panies showed the
followin& a$ounts*

#en:in& Corporation reported retained earnin&s of !.-,000 at the date of a'1uisition( #he
differen'e between the a'1uisition pri'e and underlyin& boo )alue is assi&ned to buildin&s
and e1uip$ent with a re$ainin& e'ono$i' life of fi)e years fro$ the date of a'1uisition(
?e1uired*
17 Ei)e the appropriate eli$inatin& entry or entries needed to prepare a 'onsolidated balan'e
sheet as of /e'e$ber "1, 200.(
27 <repare a 'onsolidated balan'e sheet worpaper as of /e'e$ber "1, 200.(
4---
Chapter 04 - Consolidation of Wholly Owned Subsidiaries
17

27


AACSB: Analytic
AICPA: Measurement

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