Business Consolidations Flashcards
All subsidiaries are consolidated unless _______
-significiant doubt exists regarding parent’s ability to control the sub
-bankruptcy
how are financials prepared when parent’s year end is different by more than 3 months
subsidiary must prepare special financial statements which correspond to the parent’s financial statement year end
how are financials prepared when parent’s year end is different by less than 3 months
parent’s will use subsidiary regular financial statements with material adjustments for events happening during the gap
consolidation is done on _______ only and (not or on) the books of parent subsidiary. Consolidation is for ______ purposes and done under the _______ _______ principal.
Worksheet only
not
presentation
economic entity
How will a parent record a subsidiary’s 50% of another company?
First subsidiary consolidates with second company and parent consolidates with subsidiary
JE for acquisition (equity method)
Dr. Investment in sub
Cr. CS
Cr. APIC
Cr. Cash
How are direct, indirect, and general costs recorded?
Expensed in the year incurred
How are the costs of issuing securities for financing an acquisition recorded?
Netted against the proceeds of debt and equity securities by
Dr. APIC
Cr. Cash
Market Capitalization FV
shares in subsidiary x market price on BS date
Purchase Price paid FV
Purchase price of investment in subsidiary/ Ownership %
Goodwill Calculation
FV of Company at Acquisition
Less: FV of identifiable net assets
FV net assets
Assets - Liabilities
OR common stock + APIC + RE
Equity method profit/loss calculation
% share of profit = total profit/loss x ownership
Equity method profit/loss JE
Profit
Dr. Investment in Equity Method Investee
Cr. Equity in Earnings of Investee
Loss
Dr. Equity in Earnings of Investee
Cr. Investment in Equity Method investee
JE for equity method dividends
Dr. Cash
Cr. Investment in equity method investee
