Ch.4_notes

Ch.4_notes - Consolidation Techniques & Procedures...

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Chapter 4 I. Sequence of Entries/Adjustments on the Consolidated Working Papers (1) Adjust for any errors or omissions on either the parents or subsidiary’s books. (2) Eliminate inter-company profits or losses from exchanges of (3) Eliminate the parent’s “ Income from Subsidiary ” account and the parent’s share of the subsidiary’s “ dividends declared .” The difference will adjust the “ Investment in Subsidiary account back to its beginning balance. (4) Eliminate the subsidiary’s stockholder’s equity accounts and the parent’s “ Investment in Subsidiary ” account, and recognize the unamortized cost-book differential at its beginning balance. If the subsidiary is less than 100% owned by the parent, minority interest ” will also be recognized at its beginning balance. (5) Allocate the unamortized cost-book differences between the parent’s investment cost and the book value of the net assets acquired (i.e., the cost-book differential), and eliminate the “unamortized excess.” (6) Record amortization or depreciation of the cost-book differential for the current year. (7) Eliminate any inter-company (reciprocal) balances for dividends or other payables and receivables. (8) If subsidiary is less than 100% owned, record “ Minority Interest Income ”, eliminate the minority interest share of dividends, and adjust “ Minority Interest ” to its end-of-period balance. 1
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II. Consolidation After Date of Acquisition (Parent uses the Complete Equity Method) Problem 4-5 , 9 th ed. Allocation of excess cost over book value acquired:
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Ch.4_notes - Consolidation Techniques & Procedures...

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