TwoSubs.xls (c)john Bildersee 2002 Two subsidaries - with land sales from parent to each subsidiary, from each subsidiary to parent, and between subsidiaries Cost of acquisition 1,200,000 Life Percent Discount Annual Book value of Subsidiary 1,000,000 Purchase premium 300,000 Revaluation Adjustmnt Expense P's ownership position 90% Revaluation of inventory 50,000 1 45,000 45,000 45,000 Capital stock of subsidiary 500,000 Revaluation of PPE - 15 - - - (a portion of book value) Revaluation of patents - 5 - - - 255,000 255,000 Original entry (Period beginning position on P's Books) Investment in S 1,200,000 Cash (or other) 1,200,000 Consolidation (Part 1) - Elimination of period beginning entry (1) (2) Capital stock - S 500,000 Inventory - P 45,000 Retained Earnings - S 500,000 PPE - P - Purchase Premium 300,000 Patents - P - Investment in S 1,200,000 Goodwill 255,000 MI - S 100,000 Purchase Premium 300,000 Part 2 - Events for the period Year number 1 P's ownership position 90% Subsidiary's income before adjustments 340,000 P's equity in dividends 90,000 Subsidiary's dividends 100,000 P's equity in S's income 306,000 Adjustments - equity income to P based on fair values on P's books P's Equity in S's income (book value) 306,000 Sale of Inventory 45,000 Extra Depreciation - Extra Amortization - Impairments - Total 45,000 P's Equity in S's income (fair value) 261,000 Income entry for year Investment in S 306,000 Investment in S (Extra Exp) 45,000 P's equity in income 261,000
TwoSubs.xls (c)john Bildersee 2002 Dividends for year (P) Dividends for year (S to P) Cash (or D/R) 90,000 Dividends 90,000 Investment in S 90,000 Cash (or D/P) 90,000 (Insert 1 for payment, anything else for receivable) 1 Consolidation (Part 2) - Period Eliminations (3) (3) P's equity in income 261,000 Investment in S 90,000 Investment in S 261,000 Dividends 90,000 (4) (5) CGS 45,000 MI in income 34,000 Depreciation expense - Dividends - S 10,000 Amortization expense - MI - S 24,000 Impairment - Inventory - P 45,000 Minority Interest Acc Dep - P - 100000 Acc Amort - P - 0 24000 Goodwill - 124000 (Ending balance in MI acct) (If = 1, then no entry; otherwise elimination of receivable and payable necessary) (6) D/P - D/R - Consolidation (Part 3) - Intercompany Land Sales Sale of land - parent to subsidiary Subsidiary Cash-P 35,000 Land - S 35,000 Land - P 35,000 Cash-S 35,000 Gain-P - P's equity in income - (Adjusting investment account BEFORE eliminations) Investment in S - (7) Elimination Gain-P - Land - S -
Sale of land - subsidiary to parent Parent Cash-S 35,000 Land - P 35,000 Land - S 35,000 Cash-P 35,000 Gain-S - P's equity in income - (Adjusting investment account BEFORE eliminations) Investment in S - (8) Elimination of Gain Gain-S - Land - P - -------------------- ------------------------------------------------------------------------ (9) Elimination of impact on minority interest MI - MI in income - Sale of land - subsidiary S to subsidiary T Subsidiary Cash-S 35,000 Land-T 35,000 Land-S 25,000 Cash-T 35,000 Gain-S 10,000 P's equity in income 9,000 (Adjusting investment account BEFORE eliminations) Investment in S 9,000 (10) Elimination Gain-S 10,000 Land-T 10,000 -------------------- ------------------------------------------------------------------------ (11) Elimination of impact on minority interest MI 1,000 MI in income 1,000 TwoSubs.xls (c)john Bildersee 2002
Two subsidaries - with land sales from parent to each subsidiary, from each subsidiary to parent, and between subsidiaries Cost of acquisition 1,000,000 Life Proportionat Discount Annual Book value of Subsidiary 1,000,000 Purchase premium 200,000 e Adjustmnt Expense P's ownership position 80% Revaluation of inventory 50,000 1 40,000 40,000 40,000 Capital stock of subsidiary 500,000 Revaluation of PPE 200,000 15 160,000 160,000 10,667 (a portion of book value) Revaluation of patents - 5 - - - - - Original entry (Period beginning position on P's Books) Investment in T 1,000,000 Cash (or other) 1,000,000 Consolidation (Part 1) - Elimination of period beginning entry (1) (2) Capital stock - T 500,000 Inventory - P 40,000 Retained Earnings - T 500,000 PPE - P 160,000 Purchase Premium 200,000 Patents - P - Investment in T 1,000,000 Goodwill - MI - T 200,000 Purchase Premium 200,000 Part 2 - Events for the period Year number 1 P's ownership position 80% Subsidiary's income 12,000 P's equity in dividends - Subsidiary's dividends - P's equity in S's income 9,600 Adjustments - equity income to P based on fair values on P's books P's Equity in T's income (book value) 9,600 Sale of Inventory 40,000 Extra Depreciation 10,667 Extra Amortization - Impairments - Total 50,667 P's Equity in T's income (fair value) (41,067) Income entry for year Investment in T 9,600 Investment in T (Extra Exp) 50,667 P's equity in income (41,067)
Dividends for year (P) Dividends for year (S to P) Cash (or D/R) - Dividends - Investment in T - Cash (or D/P) - (Insert 1 for payment, anything else for receivable) 1 Consolidation (Part 2) - Period Eliminations (3) (3) P's equity in income (41,067) Investment in T - Investment in T (41,067) Dividends - (4) (5) CGS 40,000 MI in income 2,400 Depreciation expense 10,667 Dividends - T - Amortization expense - MI - T 2,400 Impairment - Inventory - P 40,000 Minority Interest Acc Dep - P 10,667 200000 Acc Amort - P - 0 2400 Goodwill - 202400 (Ending balance in MI acct) (If = 1, then no entry; otherwise elimination of receivable and payable necessary) (6) D/P - D/R - Consolidation (Part 3) - Intercompany Land Sales Sale of land - parent to subsidiary T Subsidiary Cash-P 35,000 Land - T 35,000 Land - P 35,000 Cash-T 35,000 Gain-P - P's equity in income - (Adjusting investment account BEFORE eliminations) Investment in T - (7) Elimination Gain-P - Land - T -
Sale of land - subsidiary to parent Parent Cash-T 35,000 Land - P 35,000 Land-T 35,000 Cash-P 35,000 Gain-T - P's equity in income - (Adjusting investment account BEFORE eliminations) Investment in T - (8) Elimination of Gain Gain-T - Land - P - -------------------- ----------------------------------------------------------------------- (9) Elimination of impact on minority interest MI - MI in income - Sale of land - subsidiary T to subsidiary S Subsidiary Cash-T 35,000 Land-S 35,000 Land-T 23,000 Cash-S 35,000 Gain-T 12,000 P's equity in income 9,600 (Adjusting investment account BEFORE eliminations) Investment in T 9,600 (10) Elimination Gain-T 12,000 Land-S 12,000 -------------------- ----------------------------------------------------------------------- (11) Elimination of impact on minority interest MI 2,400 MI in income 2,400 TwoSubs.xls (c) John Bildersee 2002
Eliminations Income Statement P S T Debits Credits Consolidated Sales 1,960,000 1,280,000 950,000 4,190,000 P's Equity in income of S&T 201,333 3) 201,333 - Gain on sale P to S/T - 7) - - Gain on sale S/T to P - - 8) - - Gain on sale S to T 10,000 10) 10,000 - Gain on sale T to S 12,000 10) 12,000 - Inventory 1/1 100,000 400,000 400,000 Purchases 900,000 600,000 600,000 Less: Inventory 12/31 75,000 390,000 390,000 Less: CGS 925,000 610,000 610,000 4) 85,000 2,230,000 Less: Operating expenses 480,000 340,000 340,000 4) 10,667 1,170,667 4) - Less: Impairment 4) - - Less: Minority interest in income 5) 36,400 9) - 33,000 11) 3,400 Net income 756,333 340,000 12,000 756,333
Balance Sheet Cash and Receivables 275,000 360,000 360,000 6) - 995,000 Inventory 75,000 390,000 390,000 2) 85,000 4) 85,000 855,000 Investment in S&T 2,311,333 1) 2,200,000-3) 90,000 3) 201,333 Other investments 100,000 100,000 Purchase Premium 1) 500,000 2) 500,000 - Land 200,000 200,000 200,000 7) - 578,000 8) - 10) 22,000 PPE 2,000,000 1,000,000 1,000,000 2) 160,000 4,160,000 Less: Accumulated Depreciation 800,000 4) 10,667 810,667 Patents - - - 2) - - Less: Accumulated Amortization - 4) - - Goodwill - 2) 255,000 4) - 255,000 Total Assets 4,161,333 1,950,000 1,950,000 6,132,333 Current liabilities 175,000 200,000 200,000 6) - 575,000 Other liabilities 1,730,000 510,000 738,000 2,978,000 Capital Stock 800,000 500,000 500,000 1) 1,000,000 800,000 Retained Earnings - 1/1 900,000 500,000 500,000 1) 1,000,000 900,000 Net income 756,333 340,000 12,000 756,333 Less: Dividends 200,000 100,000-3) 90,000 200,000 5) 10,000 Retained Earnings - 12/31 1,456,333 740,000 512,000 1,456,333 Minority interest in S/T 1) 300,000 9) - 5) 26,400 323,000 11) 3,400 Liabiltiies and Owners' Equity 4,161,333 1,950,000 1,950,000 6,132,333
Full analysis of Equity in income of subsidiaries reported by the parent Subsidiary S Subsidiary T P's Equity in S's income (book value) 306,000 P's Equity in T's income (book value) 9,600 Sale of Inventory 45,000 Sale of Inventory 40,000 Extra Depreciation - Extra Depreciation 10,667 Extra Amortization - Extra Amortization - Impairments - Impairments - Total 45,000 Total 50,667 P's Equity in S's income (fair value) 261,000 P's Equity in T's income (fair value) (41,067) Intercompany Land Transactions P's Equity in S's income (fair value) 261,000 P's Equity in T's income (fair value) (41,067) Less: Adjustments for intercompany transactions Sale of land - parent to subsidiary S - Sale of land - parent to subsidiary T - Sale of land - subsidiary S to parent - Sale of land - subsidiary T to parent - Sale of land - subsidiary S to subsidiary T (9,000) Sale of land - subsidiary T to subsidiary S (9,600) P's Equity in S/T's income (adjusted fair value) 201,333 Full analysis of Equity in income of subsidiaries reported by the parent (by subsidiary) Subsidiary S Subsidiary T P's Equity in S's income (book value) 306,000 P's Equity in T's income (book value) 9,600 Sale of Inventory (45,000) Sale of Inventory (40,000) Extra Depreciation - Extra Depreciation (10,667) Extra Amortization - Extra Amortization - Impairments - Impairments - Total 45,000 Total 50,667 P's Equity in S's income (fair value) 261,000 P's Equity in T's income (fair value) (41,067) Sale of land - parent to subsidiary S - Sale of land - parent to subsidiary T - Sale of land - subsidiary S to parent - Sale of land - subsidiary T to parent - Sale of land - subsidiary S to subsidiary T (9,000) Sale of land - subsidiary T to subsidiary S (9,600) Total (9,000) Total (9,600) P's Equity in Ss income (adjusted fair value) 252,000 P's Equity in T's income (adjusted fair value) (50,667) P's Equity in S/T's income (adjusted fair value) 201,333