ACT470 Colorado State Assessing & Preparing Consolidated Financial Statements Case Paper

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ACT470

Colorado State University

Description

The first part is a scenario covering the topic of consolidated financial statements. The second part is the preparation of a consolidated financial statement. You will submit both parts separately. The textbook for this course is Advanced Accounting (3rd ed.). ISBN-13: 978-1-61853-190-2

Part 1: Scenario – Written

A new employee has been given responsibility for preparing the consolidated financial statements of Sample Company. After attempting to work alone for some time, the employee seeks assistance in gaining a better overall understanding of the way in which the consolidation process works. You have been asked to assist in explaining the consolidation process. The employee is asking you to respond to the following questions. Please provide full explanations and use examples to support your work.

  1. Why must the eliminating entries be entered in the consolidation worksheet each time consolidated statements are prepared?
  2. How is the beginning-of-period non-controlling interest balance determined?
  3. How is the end-of-period non-controlling interest balance determined? Provide an example.
  4. Which of the subsidiary’s account balances must always be eliminated? Why?
  5. Which of the parent company’s account balances must always be eliminated? Why?

Submission Requirements:

  • Your responses should be complete, with appropriately cited examples, well written, and in conformity with APA requirements.
  • The response should be a minimum of 2 full pages, but should not exceed 3 pages.
  • Please ensure that you do not use a question-answer format. Please respond to the question, including the question. For example, for question 1, you would begin the writing:
    • Eliminating entries must be entered in the consolidation worksheet each time the consolidated statements are prepared in order to…
  • As this assignment has the highest point value of any assignment – complete, detailed entries are necessary to ensure you receive maximum credit.
  • Each response for above items 1-5 should be no less than one-half page in length.
  • A FASB reference must be included for at least 3 of the responses.

Part 2: Problem Solving - Consolidated Financials

Assume that on 1/1/X0, a parent company acquires a 70% interest in its subsidiary for a price at $480,000 over book value. The excess is assigned as follows:

AssetFair ValueUseful Life
Patent$320,0008 years
Goodwill160,000Indefinite

70% of the goodwill is allocated to the parent.

Included in the attached Excel spreadsheet are the pre-consolidation financial statements for both the parent and the subsidiary.

Submission Requirements:

Using the Project_Option01.xlsx Excel spreadsheet:

  • Prepare the consolidated financial statements at 12/31/X6 by placing the appropriate entries in their respective debit/credit column cells.
  • Indicate, in the blank column cell to the left of the debit and credit column cells if the entry is a [C], [E], [A], [D] or [I]entry.
  • Use Excel formulas to derive the Consolidated column amounts and totals.
    • Using the “Home” key in Excel, go to the “Styles” area and highlight the [C], [E], [A], [D] or [I]entry cells in different shades.
    Textbook for this course is:

Unformatted Attachment Preview

Option 1 Parent Income Statement: Sales Cost of Goods sold Gross profit Income (loss) from subsidiary Operating expenses Net Income Consolidated NI attrib to NCI Consolidated NI attrib to CI Subsidiary 6,000,000 (4,000,000) 2,000,000 112,000 (1,500,000) 612,000 2,000,000 (1,200,000) 800,000 Statement of Ret Earnings: BOY retained earnings Net income Dividends EOY retained earnings 1,978,000 612,000 (190,000) 2,400,000 970,000 200,000 (100,000) 1,070,000 Balance Sheet: Cash Accounts receivable Inventory Equity investment 200,000 600,000 800,000 1,400,000 120,000 400,000 880,000 2,000,000 1,200,000 5,000,000 2,600,000 500,000 1,100,000 600,000 400,000 2,400,000 200,000 600,000 280,000 450,000 1,070,000 5,000,000 2,600,000 PPE, net Patent Goodwill Current liabilities Long-term liabilities Common stock APIC Retained earnings Noncontrolling interest Consolidation Entries Dr (600,000) 200,000 0 Consolidation Entries Cr Consolidated 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
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Explanation & Answer

Attached.

Running head: CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Financial Statements
Student’s Name
Professor’s Name
Course Title
Date

1

CONSOLIDATED FINANCIAL STATEMENTS

2

Consolidated Financial Statements
Eliminating entries must be entered in the consolidation worksheet each time the
consolidated statements are prepared to eradicate intercompany transactions. A lot of those items are
not documented in the actual books of either the parent or subsidiary Company. Moreover, these
transactions are not carried over, must be adjusted yearly and are made purposefully for preparing
the consolidated statements. During the consolidation process of financial statements, individual
companies continue to run separately with different accounting books. An attempt to make adjusting
book entries is incorrect and eliminates transactions. Therefore, eliminating entries consolidate
worksheet to adjust different account balances of consolidating companies. Consolidation reports
the amounts which a business would show if it operated as a single entity (Halsey & Hopkins,
2017). This process improves efficiency and legality of the consolidation process, which involves a
parent company and its subsidiary.
The beginning-of-period non-controlling interest balance is determined by the assets on the
book of a subsidiary on a similar date of elimination. Non-controlling interest (NCI) is...


Anonymous
I was having a hard time with this subject, and this was a great help.

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