consolidation

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The final project for this course is the creation of an Excel spreadsheet model that shows the consolidation worksheet, intercompany elimination entries, other consolidation entries, and the final income statement and balance sheet for a sample parent and subsidiary company.

 

Assume the following when completing the project:

 

Assume that the parent owned the subsidiary for the entire year for which financial statements are being prepared. The scenario indicates that as of December 31, there is a difference between book value and fair value for inventory and depreciable assets. Assume that these differences existed at the date of acquisition. Record only the differential and do not worry about amortization of the differential. Prepare the consolidation worksheet using the equity method. Assume that the trial balance was prepared prior to any entry the parent company made to record the net loss from the subsidiary.

The Model Assignment:

 

·         Students will be given the description of a parent company and a subsidiary company along with the two firms’ trial balances at book value as of December 31, 2012, the end of the year for both firms (see Company Information below).

·         The financial data will be presented in English pounds (£) as local currency.

·         Other data pertaining to the consolidation is also to be provided.

·         The student will analyze the data for purpose of consolidation.

·         The student will create a useful Excel model that shows the consolidation worksheet, intercompany elimination entries, other consolidation entries, and the final income statement and balance sheet.

·         Using the consolidated financial statements created, students will then use Excel modeling to translate the consolidated income statement and balance sheet from English pounds to U.S. dollars based on exchange rates provided (the U.S. dollar is the functional currency).

 

Requirements:

 

·      ·         As many computations as possible should be done by the model with the exception of entering the original financial statement data.

·         The report should utilize “macros” and other built-in features found in Excel.

Other Important Information:

 

  1. Subsidiary Company’s assets and liabilities are all shown at fair value except for:

a.       The fair value of Inventory is 32,000.

b.      The fair value of Depreciable Assets is 370,000.

  1. Subsidiary company sold Parent Company an item that is in Parent Company’s inventory for 10,000 and cost Subsidiary Company 5,000. The sale was made to Parent Company on credit, and no payment has been made.
  2. On December 27, 2012, Parent Company made a long-term loan to Subsidiary Company in the amount of 100,000.
  3. Subsidiary Company paid Parent Company 7,000 for Consulting Services. Subsidiary Company considers this an Administrative Expense, and Parent Company considers it Sales Revenue.
  4. Exchange rates are:

March 31, 2012, Exchange Rate:                               1 £ = $1.24
Average Rate for 2012:                                                 1 £ = $1.22
December 31, 2012, Exchange Rate:                       1 £ = $1.20

 

 

 

Company Information

 

 

 

Below you will find the trial balance for Parent Company and its wholly owned purchase, Subsidiary Company, as of December 31, 2012. The financial statements are denominated in British pounds.

 

Company

Parent

Company

Subsidiary

Company

Accounts

Debit

Credit

Debit

Credit

Cash

£10,000

 

£4,000

 

Accounts Receivable

25,000

 

10,000

 

Inventory

30,000

 

12,000

 

Short-Term Investments

40,000

 

6,000

 

Prepaid Assets

35,000

 

12,000

 

Investment in Subsidiary

290,000

 

 

 

Long-Term Notes Receivable

150,000

 

14,000

 

Debt Service Fund

50,000

 

 

 

Depreciable Assets

900,000

 

350,000

 

Accumulated Depreciation

 

£200,000

 

£50,000

Intangible Assets

45,000

 

20,000

 

Current Liabilities

 

92,000

 

44,000

Long-Term Notes Payable

 

225,000

 

119,000

Common Stock

 

400,000

 

200,000

Retained Earnings

 

482,000

 

50,000

Sales Revenue

 

750,000

 

245,000

Cost of Goods Sold

330,000

 

160,000

 

Selling Expenses

100,000

 

45,000

 

Administrative Expenses

120,000

 

70,000

 

Interest Expenses

24,000

 

5,000

 

 

Other Important Information:

 

  1. Subsidiary Company’s assets and liabilities are all shown at fair value except for:

a.       The fair value of Inventory is 32,000.

b.      The fair value of Depreciable Assets is 370,000.

  1. Subsidiary company sold Parent Company an item that is in Parent Company’s inventory for 10,000 and cost Subsidiary Company 5,000. The sale was made to Parent Company on credit, and no payment has been made.
  2. On December 27, 2012, Parent Company made a long-term loan to Subsidiary Company in the amount of 100,000.
  3. Subsidiary Company paid Parent Company 7,000 for Consulting Services. Subsidiary Company considers this an Administrative Expense, and Parent Company considers it Sales Revenue.
  4. Exchange rates are:

March 31, 2012, Exchange Rate:                                                                    1 £ = $1.24
Average Rate for 2012:                                                                   1 £ = $1.22
December 31, 2012, Exchange Rate:                                                                   1 £ = $1.20

 

    • 9 years ago
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