Below you will find the trial balance for Parent Company and its wholly owned purchase, Subsidiary Company, as of December 31, 2012. The financial statements are denominated in British pounds.

Company	Parent	Company	Subsidiary	Company
Accounts	Debit	Credit	Debit	Credit
Cash	10,000		4,000
Accounts Receivable	25,000		10,000
Inventory	30,000		12,000
Short-Term Investments	40,000		6,000
Prepaid Assets	35,000		12,000
Investment in Subsidiary	290,000
Long-Term Notes Receivable	150,000		14,000
Debt Service Fund	50,000
Depreciable Assets	900,000		350,000
Accumulated Depreciation		200,000		50,000
Intangible Assets	45,000		20,000
Current Liabilities		92,000		44,000
Long-Term Notes Payable		225,000		119,000
Common Stock		400,000		200,000
Retained Earnings		482,000		50,000
Sales Revenue		750,000		245,000
Cost of Goods Sold	330,000		160,000
Selling Expenses	100,000		45,000
Administrative Expenses	120,000		70,000
Interest Expenses	24,000		5,000

Assume the following when completing the project:

Assume that the parent owned the subsidiary for the entire year for which financial statements are being prepared. The scenario indicates that as of December 31, there is a difference between book value and fair value for inventory and depreciable assets. Assume that these differences existed at the date of acquisition. Record only the differential and do not worry about amortization of the differential. Prepare the consolidation worksheet using the equity method. Assume that the trial balance was prepared prior to any entry the parent company made to record the net loss from the subsidiary.

Guidelines

The Model Assignment:

Students will be given the description of a parent company and a subsidiary company along with the two firms trial balances at book value as of December 31, 2012, the end of the year for both firms (see Company Information below).

The financial data will be presented in English pounds () as local currency.

Other data pertaining to the consolidation is also to be provided.

The student will analyze the data for purpose of consolidation.

The student will create a useful Excel model that shows the consolidation worksheet, intercompany elimination entries, other consolidation entries, and the final income statement and balance sheet.

Using the consolidated financial statements created, students will then use Excel modeling to translate the consolidated income statement and balance sheet from English pounds to U.S. dollars based on exchange rates provided (the U.S. dollar is the functional currency).

Requirements:

This project should be prepared as a report for your supervisor.

The report should be visually pleasing.

As many computations as possible should be done by the model with the exception of entering the original financial statement data.

Milestones

Milestone One: Initial Model

In Module Four, you will submit the initial Excel model for the report that shows the consolidation entries and the final income statement and balance sheet. This milestone will be graded using the Final Project Milestone One Rubric.

Other Important Information:

1.Subsidiary Companys assets and liabilities are all shown at fair value except for:

a.The fair value of Inventory is 32,000.

b.The fair value of Depreciable Assets is 370,000.

2.Subsidiary company sold Parent Company an item that is in Parent Companys inventory for 10,000 and cost Subsidiary Company 5,000. The sale was made to Parent Company on credit, and no payment has been made.

3.On December 27, 2012, Parent Company made a long-term loan to Subsidiary Company in the amount of 100,000.

4.Subsidiary Company paid Parent Company 7,000 for Consulting Services. Subsidiary Company considers this an Administrative Expense, and Parent Company considers it Sales Revenue.

5.Exchange rates are:

March 31, 2012, Exchange Rate: 1 = $1.24 Average Rate for 2012: 1 = $1.22 December 31, 2012, Exchange Rate: 1 = $1.20