(information for question)
Today's fictional case takes place entirely on January 1, 2014.
Congratulations! You have been hired by the accounting department of Palmer Company as the Accounting Manager overseeing Financial Reporting.
Today is a very exciting day to join the team as Palmer is closing a deal that will result in the acquisition of a 90% controlling interest in Stevens Company through a cash payment of $1,000,000. You have been hired specifically because of this transaction, due to your expertise in Consolidation Accounting.
- Trial Balance of Stevens on January 1, 2014
- Fair Values of Stevens' assets and liabilities on January 1, 2014
- Trial Balance of Palmer on January 1, 2014
Additionally, your department has noted the following transactions of interest between Palmer and Stevens:
- Stevens Company's accounts receivable include $20,000 due from Palmer Company.
- Stevens Company's $40,000 note payable is payable to Palmer Company.
- Stevens Company has not yet recorded the $35,000 cash advance from Palmer Company.
(QUESTION)
A completed consolidation worksheet.
Stevens Company Date of Acquisition - January 1, 2014 [Subsidiary General Ledger = BLUE] Stevens Company Balance Sheet As of January 1, 2014 Book Value Fair Value Cash 130,726 130,726 Accounts receivable 200,000 200,000 Inventories 160,000 210,000 Equipment 300,000 390,000 Accumulated depreciation (100,000) (130,000) Land 190,000 290,000 Other 54,830 54,830 Total assets 935,556 40,000 150,000 Note payable Bonds payable Common stock Retained earnings Total liabilities and equity 40,000 205,556 500,000 190,000 935,556 Palmer Company Date of Acquisition - January 1, 2014 [Parent General Ledger = YELLOW] Cash Accounts receivable Note receivable Inventory Advance to s Equipment Accumulated depreciation Land Total Book Value 1,179,300 187,600 40,000 130,400 35,000 450,000 (250,000) 160,000 1,932,300 Accounts payable Common stock Other contributed capital Retained earnings Total 270,500 400,000 1,000,000 261,800 1,932,300 DE H T J K L M N 0 P Checks: 1. Do the Parent and Subsidiary balance sheets balance (columns B and C)? 2. Do the eliminations debits equal the credits (columns Fand H)? 3. Is consolidated Investment in Szero (column J)? 4. Is consolidated S Equity zero (column)? a 0 O Parent Consolidated Balance Cr. B F G Consolidation Worksheet 2 [Outside of General Ledger System = ORANGE] 3 [Data pulled from Parent General Ledger = YELLOW] 4 [Data pulled from Subsidiary General Ledger = BLUE] 5 6 PARENT COMPANY AND SUBSIDIARY 7 Consolidated Balance Sheet Workpaper 8 January 1, 2014 9 10 Subsidiary Eliminations 11 Company Company Dr 12 Cash 13 Accounts Receivable 14 Note Receivable 15 Inventory 16 Advance to Subsidiary Company 17 Investment in Subsidiary Company 18 Equipment 19 Accumulated depreciation 20 Land 21 Other 22 23 24 Total Assets 25 26 Accounts Payable 27 Notes Payable 28 Bonds Payable 29 30 Common Stock: 31 Parent Company Subsidiary Company 33 Other Contributed Capital: 34 Parent Company 35 Subsidiary Company 36 Retained Earnings: 37 Parent Company 38 Subsidiary Company 39 Noncontrolling Interest 40 Total Liabilities and Equity 41 42 32 Stevens Company Date of Acquisition - January 1, 2014 [Subsidiary General Ledger = BLUE] Stevens Company Balance Sheet As of January 1, 2014 Book Value Fair Value Cash 130,726 130,726 Accounts receivable 200,000 200,000 Inventories 160,000 210,000 Equipment 300,000 390,000 Accumulated depreciation (100,000) (130,000) Land 190,000 290,000 Other 54,830 54,830 Total assets 935,556 40,000 150,000 Note payable Bonds payable Common stock Retained earnings Total liabilities and equity 40,000 205,556 500,000 190,000 935,556 Palmer Company Date of Acquisition - January 1, 2014 [Parent General Ledger = YELLOW] Cash Accounts receivable Note receivable Inventory Advance to s Equipment Accumulated depreciation Land Total Book Value 1,179,300 187,600 40,000 130,400 35,000 450,000 (250,000) 160,000 1,932,300 Accounts payable Common stock Other contributed capital Retained earnings Total 270,500 400,000 1,000,000 261,800 1,932,300 DE H T J K L M N 0 P Checks: 1. Do the Parent and Subsidiary balance sheets balance (columns B and C)? 2. Do the eliminations debits equal the credits (columns Fand H)? 3. Is consolidated Investment in Szero (column J)? 4. Is consolidated S Equity zero (column)? a 0 O Parent Consolidated Balance Cr. B F G Consolidation Worksheet 2 [Outside of General Ledger System = ORANGE] 3 [Data pulled from Parent General Ledger = YELLOW] 4 [Data pulled from Subsidiary General Ledger = BLUE] 5 6 PARENT COMPANY AND SUBSIDIARY 7 Consolidated Balance Sheet Workpaper 8 January 1, 2014 9 10 Subsidiary Eliminations 11 Company Company Dr 12 Cash 13 Accounts Receivable 14 Note Receivable 15 Inventory 16 Advance to Subsidiary Company 17 Investment in Subsidiary Company 18 Equipment 19 Accumulated depreciation 20 Land 21 Other 22 23 24 Total Assets 25 26 Accounts Payable 27 Notes Payable 28 Bonds Payable 29 30 Common Stock: 31 Parent Company Subsidiary Company 33 Other Contributed Capital: 34 Parent Company 35 Subsidiary Company 36 Retained Earnings: 37 Parent Company 38 Subsidiary Company 39 Noncontrolling Interest 40 Total Liabilities and Equity 41 42 32
