Accounting Advanced | Course Paper

Advanced Accounting

Thirteenth Edition, Global Edition

Chapter 4

Consolidation

Techniques and

Procedures

Consolidation Techniques: Objectives

4.1 Prepare consolidation workpaper for the year of

acquisition when the parent uses the complete equity

method to account for its investment in a subsidiary.

4.2 Prepare a consolidation workpaper for the years

subsequent to an acquisition.

4.3 Locate errors in a consolidation workpaper.

4.4 Record fair values of identifiable net assets acquired.

4.5 Prepare a consolidated statement of cash flows.

4.1: Acquisition-Year Workpaper

Consolidation Techniques and Procedures

Preparing the Worksheet

Statements are entered onto the worksheet:

–Income statement

–Statement of retained earnings

–Balance sheet

Columns needed:

–Parent

–Subsidiary

–DR and CR columns for elimination entries

–Consolidated

Completing the Worksheet (1 of 2)

1. Enter Parent and Sub. amounts at 100% of book

value. (Even if parent owns less)

2. Enter elimination entries into the DR and CR

columns. (Check totals)

3. For consolidated revenues, liabilities, and equity

(other than ending retained earnings):

–Add parent, subsidiary, less DR, plus CR.

4. For consolidated assets:

–Add parent, subsidiary, plus DR, less CR.

Completing the Worksheet (2 of 2)

5. For income, ending retained earnings and all

subtotals and totals:

–Compute directly in consolidated column.

Note:

–The total consolidated assets should equal the

total consolidated liabilities and equity.

–Expenses on the income statement and

dividends on the statement of retained earnings

are generally shown as negative numbers. So

compute the consolidated amounts as you

would for revenues

Workpaper Entries

1. Adjust for errors & omissions

2. Eliminate intercompany profits and losses

3. Eliminate income & dividends from sub. and bring

Investment account to its beginning balance

4. Record noncontrolling interest in sub.’s earnings &