Purchase Solution

Consolidation worksheet and the Parent or Subsidiary

Not what you're looking for?

Ask Custom Question

A clerk in the accounting department recently entered trial balance data for the parent company and its subsidiaries in the company's consolidation program. After a few minutes of additional work needed to eliminate the intercompany investment account balances, the clerk expressed his/her satisfaction with having completed the consolidation worksheet. In reviewing the printout of the consolidation worksheet, other employees raised several questions, and you have been asked to respond to them. Indicate whether each of the following questions can be answered by looking at the data in the consolidation worksheet or not, and also indicate why or why not.
a. Is it possible to tell if the parent is using the equity method in recording its ownership of each subsidiary?
b. Is it possible to tell if the correct amount of consolidated net income has been reported?
c. One of the employees thought the parent company had paid well above the fair value of net assets for a subsidiary. Is it possible to tell by reviewing the consolidation worksheet?
d. Is it possible to determine from the worksheet the percentage ownership of a subsidiary held by the parent?

Purchase this Solution
Solution Summary

A brief everyday language discussion of common accounting concepts. A few sentences for each.

Solution Preview

a) Yes! You can tell by looking at the consolidating journal entries and seeing if they had to adjust beginning retained earnings to convert to the equity method (or not).
b) Not really. If you made an ...

Solution provided by:
Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
Recent Feedback
  • "hey just wanted to know if you used 0% for the risk free rate and if you didn't if you could adjust it please and thank you "
  • "Thank, this is more clear to me now."
  • "Awesome job! "
  • "ty"
  • "Great Analysis, thank you so much"
Purchase this Solution
Free BrainMass Quizzes
Production and cost theory

Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.

Basic Social Media Concepts

The quiz will test your knowledge on basic social media concepts.

Operations Management

This quiz tests a student's knowledge about Operations Management

Understanding the Accounting Equation

These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.

Social Media: Pinterest

This quiz introduces basic concepts of Pinterest social media

View More Free Quizzes
Related BrainMass Solutions

  • Accounting Concept Definitions

    E)The acquired subsidiary must be smaller in size than the acquiring parent. 3.When a company applies the cost method in accounting for its investment in subsidiary and the subsidiary reports income in excess of dividends paid, what worksheet entry

  • Consolidation

    Valuation of subsidiary accounts is based on the parent company's cost and specific subsidiary assets and liabilities are consolidated at the ownership percentage of their fair market values. 2.

  • Determine parent's financial records subsequent to acquisition

    Explain what this means "Determine the amounts to be recognized on the parent's financial records subsequent to a subsidiary's acquisition" When a parent owns controlling interest in a subsidiary and they both keep separate books, a consolidation worksheet

  • Prepare consolidation entries

    Prepare consoli¬ dation worksheet entries for December 31,2009, and December 31,2010. The solution explains the consolidation entries.

  • Calculations Based on Account Balances

    How is the consolidated Expense account affected by the accounting method used by the parent to record ownership of this subsidiary? c.

  • Help with a Consolidation Balance Sheet

    All goodwill or gain is allocated to the parent.

  • Consolidation and Parent Holds

    547165 Consolidation and Parent Holds When is consolidation considered inappropriate even though the parent holds a majority of the voting common shares of another company?

  • Mergaronite and Hill Consolidation: Income Statement

    (b) In requirement (a) why can the consolidated totals be determined without knowing which method the parent used to account for the subsidiary?

  • Finances and Currency Exchange Rates

    B) Consolidated financial statements are produced primarily for the benefit of the parent company stockholders. C) The parent company concept is a hybrid of the proportionate consolidation concept and the parent company concept.

View More Related Solutions