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    Help with a Consolidation Balance Sheet

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    Please provides a tutorial on how to consolidate a balance sheet. Please include guidelines and examples.

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    In creating consolidated balance sheet, remember SAIDE

    S - Subsidiary investment
    This entry removes the beginning equity balances of the subsidiary and the investment in the subsidiary. In this entry, the non-controlling interest is recognized.
    DR: Common stock - subsidiary
    DR: Retained earnings, beginning - subsidiary
    CR: Investment in subsidiary
    CR: Non-controlling interest

    A - Recognize adjustments for fair values
    DR: Assets
    CR: Investment in subsidiary

    I - reverse recognized equity income in subsidiary
    DR: Equity income in subsidiary
    CR: Investment in subsidiary

    D - Reverse entry for dividends
    DR: Investment in subsidiary
    CR: Dividends

    E - recognize amortization expense for excess of fair value over ook value
    DR: Amortization expense
    CR: Asset

    Here is an example that can help you understand the process better. Good luck!


    Approaching a Consolidation Problem
    - Original Investment
    - Throughout the Period
    - Set Up Worksheet
    - Elimination Entries
    - Preparing the Financial Statements

    Approaching a Consolidation Problem

    1. Original Investment - Record original investment using either initial value or equity method
    - Allocate differential to identifiable accounts
    - Determine goodwill (or gain)
    - Determine how differential will be amortized
    - Allocate differential to non-controlling interest

    2. Throughout the accounting period - Equity or initial value method is used internally to account for the following subsidiary activities:
    - Reporting of subsidiary net income (equity method only)
    - Receipt of dividends (equity and initial value methods)

    3. Set up worksheet - Organize accounts for preparation of:
    - Income Statement
    - Statement of Retained Earnings
    - Balance Sheet

    4. Elimination entries (most difficult part):
    - Convert initial value to equity method (if needed)
    - Eliminate equity section of subsidiary
    - Adjust identifiable accounts to FMV and recognize goodwill (unless push down is used)
    - Eliminate subsidiary net income
    - Eliminate inter-company dividend payments
    - Amortization/Depreciation of the differential (unless push down is used)
    - Eliminate any inter-company transfers or debts

    5. Prepare financial statements
    - Closing entries

    1. Original Investment - Record original investment using either initial value or equity method

    Facts at January 1, 2009:
    - Bull, Corp. purchased 80% of Calf, Co. on January 1, 2009 for $425,000.
    - At acquisition, the FMV of the non-controlling interest is $102,500.
    - Calf, Co. ...

    Solution Summary

    This solution includes a tutorial on how to consolidate a balance sheet. It includes extensive guidelines, easy pneumonic and examples. It is 12 pages long and includes color illustrations.