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.

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 noncontrolling interest balance determined?
3. How is the end-of-period noncontrolling 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?

Your responses should be complete, cite appropriate examples, well written, and in conformity withthe 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:

1. Select an accounting method (either cost or equity) and explain why you selected this method
2. Perform the required journal entries
3. Complete the consolidation worksheet
4. Prepare the consolidated balance sheet in good form

Complete all work on the spreadsheet attached to this assignment; it will be your only deliverable.

Make sure to label your answers and provide support where needed. Your responses should be complete, well written, and in conformity with APA.

1 2 3 4 5 Part I Prepare your written response in the areas below. Use a separate section to address a separate part of the question. P Assume that Big Company decides to acquire 100% of Little Company for $200,000. Prepare the consolidated balance sheet and any supporting worksheets. Big Company Balance Sheet Assets, Liabilities & Equities Cash AR Inventory Land PP&E Accumulated Depreciation Book Value $500,000 $10,000 $50,000 $40,000 $400,000 -$150,000 Patent $0 Total Assets $850,000 AP $110,000 Common Stock $395,000 Additional Paid In Capital $300,000 Retained Earnings $45,000 Total Liabilities & Equity $850,000 Little Company Balance Sheet Assets, Liabilities & Equities Book Value Cash $35,000 AR $10,000 Inventory $65,000 Land $40,000 PP&E $40,000 Accumulated Depreciation -$5,000 Patent $0 Total Assets $185,000 AP $25,000 Common Stock $25,000 Additional Paid In Capital $35,000 Retained Earnings $100,000 Total Liabilities & Equity $185,000 Assume that Fair Value of all noncash assets are 25% greater than book value Calculation of fair value of the net assets of Little Company Part II Journal Entry for Acquisition Assume that Big Company decide Company for $200,000. Prepare the c any supporting w Big Company Wo Assets, Liabilities & Equities Cash AR Inventory Land PP&E Accumulated Depreciation Goodwill Patent Total Assets AP Common Stock Additional Paid In Capital Retained Earnings Total Liabilities & Equity Big Company decides to acquire 100% of Little Balance Sheet 0,000. Prepare the consolidated balance sheet and Prepare theinConsolidated the area below any supporting worksheets. Big Company Worksheet Big Company Balance Sheet Assets, Liabilities & Equities Cash AR Inventory Land PP&E Accumulated Depreciation Patent Total Assets AP Common Stock Additional Paid In Capital Retained Earnings Total Liabilities & Equity