P acquired 75% of the shares in S on 1 January 20X7 when S hadretained earnings of £15,000. The market price of Sâs shares at thedate of acquisition was £1.60. P values non-controlling interest atfair value at the date of acquisition. Goodwill is notimpaired.
P S
Property, plant and equipment 80,000 60,000
Shares in S 68,000
Total Non Current Assets 148,000 60,000
Current Assets 52,000 35,000
Total Assets 200,000 95,000
Share capital - £1 shares 100,000 50,000
Retained earnings 70,000 25,000
Total Equity 170,000 75,000
Current liabilities 30,000 20,000
Total Equity and liabilities 200,000 95,000
1. Prepare the consolidated balance sheet of P Group
2. Explain and comment the process of consolidation?
P acquired 75% of the shares in S on 1 January 20X7 when S hadretained earnings of £15,000. The market price of Sâs shares at thedate of acquisition was £1.60. P values non-controlling interest atfair value at the date of acquisition. Goodwill is notimpaired.
P S
Property, plant and equipment 80,000 60,000
Shares in S 68,000
Total Non Current Assets 148,000 60,000
Current Assets 52,000 35,000
Total Assets 200,000 95,000
Share capital - £1 shares 100,000 50,000
Retained earnings 70,000 25,000
Total Equity 170,000 75,000
Current liabilities 30,000 20,000
Total Equity and liabilities 200,000 95,000
1. Prepare the consolidated balance sheet of P Group
2. Explain and comment the process of consolidation?
Related questions
On December 31, 200X P Corporation paid $300,000 cash for 80% ofthe | ||||
common stock of S Company which becomes a subsidiary.Following | ||||
information is shown prior to the acquisition beingrecorded: | ||||
P Company | ||||
Assets | Liabilities and Equity | |||
Cash | 580,000 | Liabilities | 90,000 | |
Inventories | 60,000 | |||
Plant | 340,000 | Common Stock, $5pv | 100,000 | |
Paid in Capital | 200,000 | |||
Retained Earnings | 590,000 | |||
Total | 980,000 | Total | 980,000 | |
S Company | ||||
Assets | Liabilities and Equity | |||
Inventories | 20,000 | Liabilities | 30,000 | |
Other assets | 40,000 | Long Term Debt | 50,000 | |
Plant | 140,000 | Common Stock, $10pv | 40,000 | |
Paid in Capital | 20,000 | |||
Retained Earnings | 60,000 | |||
Total | 200,000 | Total | 200,000 | |
S market values are: | ||||
Plant | $250,000 | |||
Inventory | $50,000 | |||
1. Prepare the entries in journal format to record theacquisition | ||||
and post to the general edger accounts. | ||||
2. Prepare a consolidation workpaper. | ||||
3. Prepare consolidated balance sheet. | ||||
On January 1, 20X9, Zigma Company acquired 100 percent of Standard Company's common shares at underlying book value. Zigma uses the equity method in accounting for its ownership of Standard. On December 31, 20X9, the trial balances of the two companies are as follows:
| Zigma Company | Standard Company | |||
| Item | Debit | Credit | Debit | Credit |
| Current Assets | 238,000 | 95,000 | ||
| Depreciable Assets | 300,000 | 170,000 | ||
| Investment in Standard Company | 100,000 | |||
| Other Expenses | 90,000 | 70,000 | ||
| Depreciation Expense | 30,000 | 17,000 | ||
| Dividends Declared | 32,000 | 10,000 | ||
| Accumulated Depreciation | 120,000 | 85,000 | ||
| Current Liabilities | 50,000 | 30,000 | ||
| Long-Term Debt | 120,000 | 50,000 | ||
| Common Stock | 100,000 | 50,000 | ||
| Retained Earnings | 175,000 | 35,000 | ||
| Sales | 200,000 | 112,000 | ||
| Income from Standard Company | 25,000 | |||
| 790,000 | 790,000 | 362,000 | 362,000 |
Required
a. Prepare the journal entries on Zigmaâs books for the acquisition of Standard on January 1, 20X9 as well as any normal equity-method entry(ies) related to the investment in Standard Company during 20X9.
b. Prepare the consolidation entries needed as of December 31, 20X9, to complete a consolidation worksheet.
c. Prepare a consolidation worksheet as of December 31, 20X9.
Using the data in the Option 2 Spreadsheet(linked at the bottom of the page), perform the accounting requiredfor the acquisition of Little, Inc. by Big, Inc. This is an 80%acquisition, where the book value of the assets acquired is lessthan the acquisition price. Within the worksheet, you are to:
1. Select an accounting method (either cost or equity) andexplain why you selected this method
2. Perform the required journal entries
3. Complete the consolidation worksheet
4. Prepare the consolidated balance sheet in good form
| Big CompanyBalance Sheet | Which accountingmethod is most appropriate for representing an investment of thistype? | Prepare Elimination Entriesfor Stock Acquisition | ||||||||
| Assets, Liabilities & Equities | Book Value | Account | DR | CR | ||||||
| Cash | $2,100,000 | |||||||||
| AR | $10,000 | |||||||||
| Inventory | $200,000 | |||||||||
| Land | $40,000 | |||||||||
| PP&E | $400,000 | |||||||||
| Accumulated Depreciation | -$150,000 | |||||||||
| Patent | $0 | |||||||||
| Total Assets | $2,600,000 | Prepare thejournal entries for a 80% Asset Acquisition (using Big CompanyCash) | ||||||||
| AP | $100,000 | |||||||||
| Common Stock ($10 par) | $450,000 | Account | DR | CR | ||||||
| Additional Paid In Capital | $600,000 | |||||||||
| Retained Earnings | $1,450,000 | |||||||||
| Total Liabilities &Equity | $2,600,000 | Prepare thejournal entries for a 80% Acquisition by issuing 10,000 shares ofBig Company Stock | Big Company Balance Sheet (Consolidated) | |||||||
| Little Company BalanceSheet | Assets, Liabilities & Equities | |||||||||
| Assets, Liabilities & Equities | Book Value | Account | DR | CR | Cash | |||||
| Cash | $35,000 | Investment in Little | AR | |||||||
| AR | $10,000 | Common Stock | Inventory | |||||||
| Inventory | $65,000 | Additional Paid In Capital | Land | |||||||
| Land | $40,000 | Allocation of Excess Schedule | PP&E (net) | |||||||
| PP&E | $400,000 | Accumulated Depreciation | ||||||||
| Accumulated Depreciation | -$150,000 | Goodwill | ||||||||
| Patent | $0 | Patent | ||||||||
| Total Assets | $400,000 | Total Assets | ||||||||
| AP | $100,000 | AP | ||||||||
| Common Stock | $100,000 | Common Stock ($10 par) | ||||||||
| Additional Paid In Capital | $50,000 | Additional Paid In Capital | ||||||||
| Retained Earnings | $150,000 | Retained Earnings | ||||||||
| Total Liabilities &Equity | $400,000 | NCI | ||||||||
| Total Liabilities & Equity | ||||||||||
| Assumethat all noncash assets have a Fair Value that is 10% greater thanBook Value | ||||||||||
