Unformatted text preview: st consolidation setting: the financial statements of related companies are consolidated immediately after a parent – subsidiary relationship is established through a business combination or creation of a new subsidiary.
Peerless Products Corporation purchases all of the common stock of Special Foods Inc. on January 1, 20X1 for $300,000, an amount equal to the fair value of Special Foods as a whole.
2-8 Balance Sheets of Peerless Products & Special Foods, January 1, 20X1, immediately before combination 2-9 Example Overview of the Consolidation Process 2-10 Balance Sheets of Peerless Products & Special Foods, January 1, 20X1, immediately after combination 2-11 Basic Elimination Entry • Investment Account must be eliminated → from a single entity viewpoint, a company cannot hold an investment in itself.
• Subsidiary’s stock & related stockholders’ equity accounts must be
eliminated → the subsidiary’s stock is held entirely whithin the
consolidated entity and none represents claims by outsiders.
2-12 Worksheet for Consolidated Balance Sheet, January 1, 20X1, 100% Acquisition at Book Value 2-13 The Optional Accumulation Elimination Entry
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