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Separate Consolidated FS-Problem 3

1. The document provides instructions and examples for preparing consolidated balance sheets using two approaches: the proportionate basis approach and the fair value basis approach. 2. Under the proportionate basis approach, the investment in the subsidiary is eliminated against the stockholders' equity accounts of the subsidiary. Under the fair value basis approach, the investment is eliminated against the allocated excess values of the subsidiary's assets and liabilities. 3. Worked examples are provided to demonstrate the consolidation entries and resulting consolidated balance sheets under each approach. Intragroup balances and transactions such as inventory and buildings are eliminated.

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Jeane Mae Boo
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800 views17 pages

Separate Consolidated FS-Problem 3

1. The document provides instructions and examples for preparing consolidated balance sheets using two approaches: the proportionate basis approach and the fair value basis approach. 2. Under the proportionate basis approach, the investment in the subsidiary is eliminated against the stockholders' equity accounts of the subsidiary. Under the fair value basis approach, the investment is eliminated against the allocated excess values of the subsidiary's assets and liabilities. 3. Worked examples are provided to demonstrate the consolidation entries and resulting consolidated balance sheets under each approach. Intragroup balances and transactions such as inventory and buildings are eliminated.

Uploaded by

Jeane Mae Boo
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Separate and Consolidated

Financial Statements
Wholly and Partially-owned Subsidiary: Bargain
Purchase Gain with FV of NCI – Date of
Acquisition
Prepare the working paper eliminating entries for
purposes of preparing consolidated balance sheet

01 Proportionate Basis Approach

02 Fair Value Basis Approach


Proportionate Basis Approach
Eliminating investment against
01
stockholders’ equity of Syria Co.

Common stock – Syria Co. 12,000  


Additional Paid in Capital-Syria Co. 108,000  
Retained Earnings - Syria Co. 72,000  
Investment in Syria Co.   153,600
Non-controlling interest (P192,000 x 20%)   38,400

Eliminating Investment against


02
allocated excess.

Inventory 6,000  
Land 36,000  
Building and Equipment 150,000  
Copyright/Intangible Asset 60,000  
Estimated liability for contingencies   6,000
Investment in Syria Co.   146,400
Non-controlling interest (P246,000 x 20%)   49,200
Retained Earnings   50,400
Fair Value Basis Approach
Eliminating investment against
01
stockholders’ equity of Syria Co.

Common stock – Syria Co. 12,000  


Additional Paid in Capital-Syria Co. 108,000  
Retained Earnings - Syria Co. 72,000  
Investment in Syria Co.   153,600
Non-controlling interest (P192,000 x 20%)   38,400

Eliminating Investment against


02
allocated excess.

Inventory 6,000  
Land 36,000  
Building and Equipment 150,000  
Copyright/Intangible Asset 60,000  
Estimated liability for contingencies   6,000
Investment in Syria Co.   146,400
Non-controlling interest (P90,000-38,400)   51,600
Retained Earnings   48,000
Prepare consolidated workpaper on January 1,20x4

01 Proportionate Basis Approach

02 Fair Value Basis Approach


Proportionate Basis Approach
    Eliminations  
Assets Pakistan Co. Syria Co. Dr. Cr. Consolidated
Cash 334,800       334,800
Accounts receivable 86,400 24,000     110,400
Inventory 96,000 60,000 6,000   162,000
Land 120,000 48,000 36,000   204,000
Buildings and equipment (net). 744,000 222,000 150,000  1,116,000
Copyright     60,000   60,000
153,600
Investment in Syria Co. 300,000     -
146,400
Total Assets 1,681,200 354,000     1,987,200
Liabilities and Stockholders’ Equity          
Accounts payable 96,000 42,000    138,000
Estimated liability for contingencies     6,000 6,000
Bonds payable 240,000 120,000     360,000
Common stock, P1 par 44,160      44,160
Common stock, P1 par   12,000 12,000    
Paid-in capital in excess of Par 723,840       723,840
Paid-in capital in excess of par   108,000 108,000   
Retained earnings 577,200    50,400 627,600
Retained earnings   72,000 72,000    
38,400
Non-controlling interest      
49,200 87,600
Total Liabilities and Stockholders’ Equity 1,681,200 354,000 444,000 444,000 1987200
Fair Value Basis Approach
    Eliminations  
Assets Pakistan Co. Syria Co. Dr. Cr. Consolidated
Cash 334,800       334,800
Accounts receivable 86,400 24,000     110,400
Inventory 96,000 60,000 6,000   162,000
Land 120,000 48,000 36,000   204,000
Buildings and equipment (net). 744,000 222,000 150,000  1,116,000
Copyright     60,000   60,000
153,600
Investment in Syria Co. 300,000     -
146,400
Total Assets 1,681,200 354,000     1,987,200
Liabilities and Stockholders’ Equity          
Accounts payable 96,000 42,000    138,000
Estimated liability for contingencies     6,000 6,000
Bonds payable 240,000 120,000     360,000
Common stock, P1 par 44,160      44,160
Common stock, P1 par   12,000 12,000    
Paid-in capital in excess of Par 723,840       723,840
3%
Paid-in capital in excess of par 45% 60%  108,000 75%
108,000 90%  
Retained earnings 577,200    48,000 625,200
Retained earnings   72,000 72,000    
38,400
Non-controlling interest      
51,600 90,000
Total Liabilities and Stockholders’ Equity 1,681,200 354,000 444,000 444,000 1987200
Prepare the consolidated balance sheet immediately
after acquisition.
01 Proportionate Basis Approach

02 Fair Value Basis Approach


Proportionate Basis Approach
Pakistan Company and Subsidiary
Consolidated Balance Sheet
January 1, 20x4
Assets  
Cash 334,800
Account's receivables 110,400
Inventories 162,000
Land 204,000
Buildings and equipment (net) 1,116,000
Copyright 60,000
Total Assets 1,987,200
Liabilities and Stockholders’ Equity  
Liabilities  
Accounts payable 138,000
Estimated liability for contingencies 6,000
Bonds payable 360,000
Total Liabilities 504,000.00
Stockholders’ Equity  
Common stock, P1 par 44,160
Paid-in capital in excess of par 723,840
Retained earnings 627,600
Parent’s Stockholders’ Equity/Equity Attributable to the Owners of the
1,395,600
Parent
Non-controlling interest 87,600
Total Stockholders’ Equity (Total Equity) 1,483,200
Total Liabilities and Stockholders’ Equity 1,987,200.00
Fair Value Basis Approach
Pakistan Company and Subsidiary
Consolidated Balance Sheet
January 1, 20x4
Assets  
Cash P 334,800
Account's receivables 110,400
Inventories 162,000
Land 204,000
Buildings and equipment (net) 1,116,000
Copyright 60,000
Total Assets P1,987,200
   
Liabilities and Stockholders’ Equity  
Liabilities  
Accounts payable 138,000
Estimated liability for contingencies 6,000
Bonds payable 360,000
Total Liabilities 504,000.00
Stockholders’ Equity  
Common stock, P1 par 44,160
Paid-in capital in excess of par 723,840
Retained earnings 625,200
Parent’s Stockholders’ Equity/Equity Attributable to the Owners of the
1,393,200
Parent
Non-controlling interest 90,000
Total Stockholders’ Equity (Total Equity) 1,483,200
Total Liabilities and Stockholders’ Equity 1,987,200.00
Thank you

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