Information for Part 2

In this part, you are consolidating BigUSA and Small Sub. And again, this part is not connected in any way to Part 1.

Information for Part 2

? BigUSA owns 100% of the outstanding common stock of Small Sub.

? Small Sub was acquired by BigUSA a few years ago (hint: this is not an acquisition accounting exercise). Inventory Transactions

? During the year the two companies sold inventory to each other as follows: BigUSA sold products to Small Sub in the amount of $125,000,000. BigUSA's gross profit on those sales was $38,000,000. We'll refer to this as "Big to Small inventory." Small Sub sold products to BigUSA in the amount of $39,000,000. Small Sub's gross profit on those sales was $12,000,000. We'll refer to this as "Small to Big inventory." As of December 31, 2020, all of the Big to Small inventory had been sold to outside customers. At that date, $17,000,000 of Small to Big inventory was still in BigUSA's inventory. Asset Transactions

? At the beginning of 2020, Small Sub sold a machine to BigUSA. The selling price (which was paid) was $5,500,000 (which approximated market value at the time). Small Sub book value of the machine was $12,000,000 cost and $8,000,000 accumulated depreciation. Small Sub recognized a gain on the difference, including it in "Other Income." Small Sub was depreciating the machine over 6 years, using straight-line depreciation with no salvage value. BigUSA is depreciating the machine over 3 years (straight-line, no salvage value). Other Transactions.

? BigUSA charges Small Sub a management fee (for various services) in the amount of $1,500,000 for the year 2020. BigUSA includes the fee income in "Other Income." Small Sub includes the expense in "Administrative" expenses.

Required for Part 2

A. make consolidated statement of financial position and a consolidated statement of income for BigUSA and Small Sub. Use the spreadsheet format, you do not need to create financial statements other than in a worksheet format.

B. I suggest you use the format in the spreadsheet, but if you wish to do something different, you may. But the end result must be consolidated financial statements.

C. Your consolidation must factor in the information provided above. Hint/Tip: Don't try to use all of the tools you've developed this semester. This is not an acquisition accounting problem. Part 2 is not a currency problem (that's in Part 1). I say this because I've seen students make that mistake ... don't!

BigUSA Company Consolidation Worksheet Data presented is as of 12/31/20 and for the year then ended. Cash Accounts receivable Inventory Other current assets Land Building Machinery Accumulated depreciation Patents, net of amortization Investment in Small Sub Total Assets Accounts payable Accrued expenses Income taxes payable Long-term debt Common stock Additional paid-in capital Accumulated Currency Adjust. Retained earnings Total Liabilities and Equity Sales Cost of Goods Sold Gross Prot Expenses: Admininstrative Selling and Marketing Technical and Research Amortization Other Income Equity Method Income Income before tax Tax provision Net Income Amounts are in US Dollars Statement of Financial Position BigUSA Small Sub 12/31/2020 12/31/2020 $ 301,000,000 8 38,500,000 785,000,000 96,000,000 1,216,900,000 165,400,000 260,000,000 31,200,000 2,562,900,000 331,100,000 301,000,000 26,000,000 2,100,000,000 271,500,000 4,205,000,000 529,300,000 {1,782,000,000} {287,400,000} 4,824,000,000 539,400,000 475,000,000 68,700,000 513,100,000 - $ 8,375,000,000 $ 939,200,000 $ 162,000,000 5 23,700,000 458,000,000 58,300,000 349,000,000 44,100,000 969,000,000 126,100,000 2,384,000,000 300,000,000 162,000,000 20,200,000 1,836,000,000 220,700,000 - (63,200,000) 3,024,000,000 335,400,000 5,022,000,000 513,100,000 $ 8,375,000,000 11 939,200,000 Year ended Year ended 12/31/2020 12/31/2020 $ 13,125,000,000 $ 1,651,125,000 7,250,000,000 912,050,000 5,875,000,000 739,075,000 1,625,000,000 201,600,000 2,187,500,000 275,900,000 1,062,500,000 134,100,000 87,500,000 12,000,000 (8,475,000) (2,500,000) 183,075,000! - 1,004,050,000 117,975,000 273,600,000 34,900,000 $ 730,450,000 1; 83,075,000