Description
Assignment Choice #1: Consolidated Financial Statements Scenario
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.
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 provide assistance 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.
- Why must the eliminating entries be entered in the consolidation worksheet each time consolidated statements are prepared?
- How is the beginning-of-period noncontrolling interest balance determined?
- How is the end-of-period noncontrolling interest balance determined? Provide an example.
- Which of the subsidiary’s account balances must always be eliminated? Why?
- Which of the parent company’s account balances must always be eliminated? Why?
Your responses should be complete, cite appropriate examples, well written, and in conformity with the CSU-Global Guide to Writing and APA Requirements.
Part 2: Problem Solving - Journal
Using the data in the Option 1 Spreadsheet (linked at the bottom of the page), perform the accounting required for the acquisition of Little, Inc. by Big, Inc. Within the worksheet, you are to:
- Select an accounting method (either cost or equity) and explain why you selected this method
- Perform the required journal entries
- Complete the consolidation worksheet
- Prepare the consolidated balance sheet in good form
Complete all work on the spreadsheet attached to this assignment; it will be your only deliverable.
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Explanation & Answer
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Part I
Prepare your written response in the areas below. Use a separate section to address a separate part of the question.
Having the fair value of non cash being 25% more than the book value, all non cash assets will be subjected to a
25% increase
The cumulative value will be the summation of little company as well as the acquiring company.The net assets
will be the cumulative figures fo the acquirer and the acquiree.
The cumulative liabilities will be the summation of the big company as well as the acquired.
The final figure will reflect a 25% increase of the little company being acquired
The final figure will reflect a 25% increase of the little company being acquired
Assume that Big Company decides to
acquire 100% of Little Company for
$200,000....