Académique Documents
Professionnel Documents
Culture Documents
4-1
4-2
Objectives (continued)
5. Apply concepts to prepare a consolidated
statement of cash flows.
6. Appendix: Understand the alternative trial
balance consolidation working paper format.
4-3
4-4
4-5
4-6
4-7
2010
Net income
$25
$30
Dividends
$15
$15
4-8
Analysis
Cost of 80% of Snap
$88
Patents
$110
90
Allocated to:
Amt Amort.
Patents
$20 10 yrs
$20
Unamort.
Bal.
Amortization
Unamort. Bal.
Amortization
Unamort. Bal.
on 1/1/2009
in 2009
on 12/31/2009
in 2010
on 12/31/2010
$20
$2
$18
$2
$16
4-9
4-10
18.4
12.0
6.4
4-11
3.0
30
Patents (B.S.)
20
1.6
88
22
4-12
4-13
Prep Snap
DR
CR Consol
Income statement:
Revenues
Income from Snap
Expenses
250.0
65.0
18.4
(200.0) (40.0)
68.4
315.0
18.4
0.0
2.0
(242.0)
4.6
(4.6)
25.0
68.4
5.0
68.4
30.0 30.0
5.0
25.0
Pearson
Education, Inc. publishing as
Prentice
Hal
Deduct
dividends
(30.0)
(15.0)
68.4
12.0
4-14
(30.0)
Prep Snap
DR
CR Consol
Cash
39.0
10.0
49.0
90.0
50.0
140.0
Investment in Snap
94.4
6.4
0.0
88.0
Plant & equipment, net
250.0
70.0
Patents
Total
Liabilities
Capital stock
Retained earnings
320.0
20.0
2.0
473.4 130.0
80.0
350.0
43.4
18.0
527.0
30.0
110.0
60.0 60.0
350.0
40.0
43.4
22.0
1.6
23.6
4-15
Prep Snap
DR
CR Consol
Income statement:
Revenues
Income from Snap
Expenses
250.0
65.0
18.4
(200.0) (40.0)
315.0
18.4
0.0
2.0
(242.0)
4.6
(4.6)
4-16
Prep Snap
DR
CR Consol
30.0 30.0
5.0
5.0
68.4
25.0
(30.0) (15.0)
68.4
12.0
(30.0)
4-17
A Look at Assets
Balance sheet:
Prep
Snap
DR
CR
Cash
39.0
10.0
49.0
90.0
50.0
140.0
Investment in Snap
94.4
6.4
Consol
0.0
88.0
Plant & equipment, net
Patents
250.0
70.0
320.0
20.0
2.0
Total
Investment in Snap is eliminated.
473.4 130.0
Patents at the start of 2009 were $20, and current
amortization is $2; they are $18 at the end of 2009.
The total is calculated in the consolidated column.
Pearson Education, Inc. publishing as Prentice Hal
18.0
527.0
4-18
Prep Snap
Liabilities
80.0
Capital stock
Retained earnings
350.0
43.4
DR
CR Consol
30.0
110.0
60.0 60.0
350.0
40.0
43.4
22.0
1.6
23.6
4-19
4-20
$88
90
Excess
Unamort. Bal. Amortization
Patents
$110
Allocated to:
Amt
Amort.
Patents
$20 10 yrs
$20
Unamort. Bal.
Amortization
Unamort. Bal.
on 1/1/2009
in 2009
on 12/31/2009
in 2010
on 12/31/2010
$20
$2
$18
$2
$16
4-21
4-22
22.4
12.0
10.4
4-23
3.0
40
Patents (B.S.)
18
2.6
94.4
23.6
4-24
$110
10
(2)
$118
4-25
2
2
10
10
4-26
Prep Snap
DR
CR Consol
Income statement:
Revenues
Income from Snap
Expenses
300.0
75.0
22.4
(244.0) (45.0)
375.0
22.4
0.0
2.0
(291.0)
5.6
(5.6)
78.4
30.0
78.4
43.4
40.0 40.0
43.4
78.4
30.0
78.4
Pearson
Education, Inc. publishing as
Prentice
Hal
Deduct
dividends
(45.0)
(15.0)
12.0
4-27
(45.0)
Prep Snap
Cash
45.0
10.0
97.0
Investment in Snap
104.8
DR
CR Consol
20.0
65.0
10.0
70.0
0.0
167.0
10.4
0.0
94.4
Plant & equipment, net
240.0
60.0
Patents
Total
18.0
Capital stock
Retained earnings
2.0
496.8 150.0
300.0
16.0
548.0
10.0 10.0
70.0
350.0
76.8
25.0
95.0
60.0 60.0
350.0
55.0
Noncontrolling
interest, Jan.1
Pearson Education, Inc. publishing as Prentice Hal
76.8
23.6
4-28
4-29
Errors
Most errors show up when the consolidated
balance sheet does not balance.
Common omissions:
Noncontrolling interest share (income)
Goodwill
Noncontrolling interest (equity)
Check equality of DR and CR adjustments.
Verify totals for parent and subsidiary statements.
Re-calculate the consolidated amounts.
Pearson Education, Inc. publishing as Prentice Hal
4-30
4-31
4-32
Analysis at Acquisition
Cost of 90% of Solo
$360
Allocated to:
Amt Amort
$400
Inventories
$10 1st yr
250
Excess
$150
Land
30 -
Building
80 20 yrs
Equipment
Noncontrolling interest, 10%(400)
$40 Goodwill
Unamort. Bal. Amortization Unamort. Bal.
12/31/2009 *
in 2010 *
on 12/31/2010
Inventorie
s
$10
($10)
$0
Land
30
30
Building
80
(4)
76
Equipment
(20)
(18)
(20) 10 yrs
50
150
* Use the
12/31/2009
and 2010
amortization
in worksheet
entries for
2010.
4-33
$60
($12)
Adjusted
$48
Solo's dividends
$20
4-34
9.0
9.0
20.0
Note receivable
(B.S.)
20.0
2. Eliminate
intercompany
profits and losses
none
3. Eliminate income & dividends from sub. and bring Investment
account to its beginning balance
Income from Solo (I.S.)
43.2
18.0
25.2
4-35
Pate: Entries (2 of 4)
4. Record noncontrolling interest in sub's earnings &
dividends
Noncontrolling interest share (I.S.)
4.8
2.0
2.8
50
150
360
40
4-36
Pate: Entries (3 of 4)
Allocate the unamortized excess according to
beginning of year balances.
Inventory
10
Land
30
Building, net
80
Goodwill
50
Equipment, net
20
Unamortized excess
150
Pearson Education, Inc. publishing as Prentice Hal
4-37
Pate: Entries (4 of 4)
6. Amortize fair value/book value differentials
Cost of sales
10
Inventory
Operating (depreciation) expense
10
4
Buildings, net
Equipment, net
4
2
9.0
9.0
4-38
Pate
Solo
900.0
300.0
DR
CR
Consol
Income statement:
Revenues
Income from Snap
43.2
(600.0
)
Operating expenses
(190.0
)
43.2
0.0
(150.0
)
10.0
(760.0)
(90.0)
4.0
1,200.0
4.8
153.2
60.0
120.0
50.0
153.2
60.0
2.0
(282.0)
(4.8)
153.2
50.0
120.0
153.2
4-39
Prep
Snap
DR
CR
Consol
Cash
13.0
15.0
20.0
76.0
25.0
20.0
Inventories
90.0
60.0
10.0
Land
60.0
30.0
30.0
Building, net
190.0
110.0
80.0
4.0
376.0
Equipment, net
150.0
120.0
2.0
20.0
252.0
Investment in Solo
394.2
9.0
0.0
48.0
101.0
20.0
0.0
10.0
150.0
120.0
25.2
360.0
Dividends receivable
9.0
9.0
Goodwill
50.0
Unamortized excess
150.0 150.0
Total
Accounts payable
0.0
50.0
0.0
993.2
360.0
1,097.0
120.0
60.0
180.0
Pearson
Education, Inc. publishing as Prentice
Dividends
payable
10.0Hal 9.0
4-40
1.0
4-41
4-42
4-43
4-44
4-45
4-46
4-47
4-48