C4-1 check me out - workpaper and to enter a number of...

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SOLUTIONS TO CASES C4-1 Need for Consolidation Process After the financial statements of each of the individual companies are prepared in accordance with generally accepted accounting principles, consolidated financial statements must be prepared for the economic entity as a whole. The individual companies generally record transactions with other subsidiaries on the same basis as transactions with unrelated enterprises. In preparing consolidated financial statements, the effects of all transactions with related companies must be removed, just as all transactions within a single company must be removed in preparing financial statements for that individual company. It therefore is necessary to prepare a consolidation
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Unformatted text preview: workpaper and to enter a number of special journal entries in the workpaper to remove the effects of the intercorporate transactions. The parent company also reports an investment in each of the subsidiary companies and investment income or loss in its financial statements. Each of these accounts must be eliminated as well as the stockholders' equity accounts of the subsidiaries. The latter must be eliminated because only the parent's ownership is held by parties outside the consolidated entity. Solutions Manual- Baker/Lembke/King, Advanced Financial Accounting, 7/e 1...
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This note was uploaded on 02/19/2011 for the course ACC 440 taught by Professor Henderson during the Spring '08 term at University of Phoenix.

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