Week 4 Project presentation student review
maiezymq12
GreeneCompanyPresentation.pptxGreene Company
Miriam Aranda
Content Layout
Information
Part 1- Subsidiaries
Part 2- Greene’s Consolidated Balance Sheet
Part 3- Overseas Companies
Conclusion
References
Information
“Greene is a rapidly expanding manufacturing company, and is considering some additional acquisitions. The company would like to diversify, and is trying to decide between the two different scenarios outlined in Part 1 and Part 3. To help him make his decision, the Chief Financial Officer would like specific information on how the potential acquisitions would affect financial reporting” (ACG 4201-- Writing Project and Presentation, n.d.).
This Photo by Unknown Author is licensed under CC BY
Part 1- Subsidiaries
According to FASB ASC 810-10-10-1, “The purpose of consolidated financial statements is to present, primarily for the benefit of the owners and creditors of the parent, the results of operations and the financial position of a parent and all its subsidiaries as if the consolidated group were a single economic entity” (FASB, n.d.)
Part 1- Subsidiaries
Insurance
Under the industry, insurances companies use SAP.
Different reporting periods
Different accounting principles.
Lumber
Historical cost
Follows GAAP
Part 1- Subsidiaries
Parent company and subsidiaries are not required to report under the same accounting policies (insurance).
Preparation-
eliminate parent company’s investment account .
intra-entity balances and transactions be eliminated (sales and purchases)
Intercompany receivables and payable
Subsidiary’s retained earnings or deficit are not included in the consolidated retained earnings.
Part 2- Greene’s Consolidated Balance Sheet
Part 2- Greene’s Consolidated Balance Sheet
Part 3- Overseas Companies
Factors need to know to be considered when determining the functional currency for a consolidated subsidiary are as follow: (1) Sales Prices, (2) Expenses, (3) Intercompany transactions, (4) Cash Flows, (5) Sales Markets, and (6) Financing (Christensen, Cottrell, & Budd, 2016). As it is also stated under FASB ASC 830-10-55-5.
This Photo by Unknown Author is licensed under CC BY-NC
Part 3- Overseas Companies: Economic indicators
New Zealand
Economy is largely based on export and imports
Financial markets are open to global financial encounter
U.S. dollar to New Zealand dollar
Exchange rate is the increase of domestic interest rates
Spain
US dollar to Euro
European Central Bank
Open markets
Continuous research on inflation
Part 3- Overseas Companies
In high inflationary economies, functional currency designation is stated which is the U.S. dollar for U.S. companies.
When acknowledging investments across borders, one of the main important tasks to understand is the different and variety of accounting standards other countries
Converting foreign currency into U.S. dollar can be done in 3 different exchange rates; current rate, historical rate, and average rate.
“1. Which exchange rate should be used to translate foreign currency balances to domestic currency? 2. How should translation gains and losses be accounted for? Should they be included in income?” (Christensen, Cottrell, & Budd, 2016, pg. 623)
Conclusion
Greene company wants to diversify and has two different scenarios, subsidiaries (Lumber and Insurance companies) and overseas companies (Spain and New Zealand). Whether overseas or within the U.S., Greene can choose either of the options. Both scenarios require extra work when preparing consolidated financial statements and under the accounting principles the Greene company is legally available to progress with any of the choices presented.
References
ACG 4201-- Writing Project and Presentation. (n.d.). Retrieved from https://keiseruniversity.blackboard.com/webapps/blackboard/content/listContent.jsp?course_id=_178215_1&content_id=_8722709_1&mode=reset
Christensen, T. E., Cottrell, D. M., & Budd, C. (2016). Advanced financial accounting (11th ed.). New York, NY: McGraw-Hill/Irwin.
Banco de España. (n.d.). Retrieved from https://app.bde.es/atz_www/jsp/webSearch.jsp?T1=open%2Bmarket&T5=Relevance&T6=bde&acceso=bde&idioma=en&tipo=avanzado&x=0&y=0&origen=cajon_home
FASB. (n.d.). FASB Accounting Standards Codification. Retrieved from https://asc.fasb.org/link&sourceid=SL2187069-110890&objid=6450050
FASB. (n.d.). General Note on Consolidation—Overall. Retrieved from https://asc.fasb.org/section&trid=2197482
Reserve Bank of New Zealand. (n.d.). Monetary policy and inflation. Retrieved from https://www.rbnz.govt.nz/challenge/team-resources/monetary-policy-and-inflation
Thank you for your time.
Greene
Company
White
CorporationDrCrConsolidated
Cash and Receivables$101,000 $20,000 121,000
Inventory80,00040,000120,000
Land150,00090,00010,000 250,000
Buildings & Equipment400,000300,0009,000 709,000
Accumulated Depreciation (135,000) (85,000)3,000 27,000 (244,000)
Investment in White
Corporation Stock
141,000
18,000 153,000 -
6,000
Total Assets $ 737,000 $ 365,000 $40,000$186,000$956,000
Accounts Payable90,00025,000 115,000
Notes Payable200,00090,000290,000
Common Stock100,000200,000200,000 100,000
Retained Earnings 347,000 50,000 50,000 3,000 347,000
3,000
NCI in NA of White
Corporation100,000 104,000
4,000
Total Liabilities & Equity$737,000 $365,000 $253,000 $107,000 $956,000
Consolidation Entries
Greene Company and Subsidiary
Consolidated Balance Sheet
12/31/2017
121,000
120,000
250,000
709,000
(244,000) 465,000
956,000
115,000
290,000
115,000
290,000
100,000
347,000
447,000
104,000
551,000
956,000
Total Liabilities and Stockholders' Equity
Accounts Payable
Notes Payable
Accounts Payable
Notes Payable
Stockholders' Equity:
Controlling Interest:
Common Stock
Retained Earnings
Total Controlling Interest
Noncontrolling Interest
Total Stockholders' Equity
Total Assets
Cash and Accounts Receivable
Inventory
Land
Buildings and Equipment
Less: Accumilated Depreciation
Facts
| Preparation of Consolidated Balance Sheet | ||
| Greene Company purchased 60 percent of White Corporation's voting shares on June 3, 2012, at book value. At that date, the fair value of the noncontrolling interest was equal to 40 percent | ||
| of the book value of White Corporation. The companies' permanent accounts on December 31, 2017, contained the following balances: | ||
| Greene Company | White Corporation | |
| Cash and Receivables | $101,000 | $20,000 |
| Inventory | 80,000 | 40,000 |
| Land | 150,000 | 90,000 |
| Buildings & Equipment | 400,000 | 300,000 |
| Investment in White Corporation Stock | 141,000 | ________ |
| $ 872,000 | $ 450,000 | |
| Accumulated Depreciation | $135,000 | $85,000 |
| Accounts Payable | 90,000 | 25,000 |
| Notes Payable | 200,000 | 90,000 |
| Common Stock | 100,000 | 200,000 |
| Retained Earnings | 347,000 | 50,000 |
| $872,000 | $450,000 | |
| On January 1, 2013, Greene paid $100,000 for equipment with a 10-year expected total economic life. | ||
| The equipment was depreciated on a straight-line basis with no residual value. | ||
| White purchased the equipment from Greene on December 31, 2015, for $91,000. Assume White did not change the remaining estimated useful life of the equipment. | ||
| White sold land it had purchased for $30,000 on February 23, 2015, to Greene for $20,000 on October 14, 2016. Assume Greene uses the fully adjusted equity method. | ||
| Required | ||
| 1. Prepare a consolidated balance sheet worksheet in good form as of December 31, 2017. | ||
| 2. Prepare a consolidated balance sheet as of December 31, 2017. |
Worksheet
| Miriam Aranda | |||||
| Consolidation Entries | |||||
| Greene Company | White Corporation | Dr | Cr | Consolidated | |
| Cash and Receivables | $101,000 | $20,000 | 121,000 | ||
| Inventory | 80,000 | 40,000 | 120,000 | ||
| Land | 150,000 | 90,000 | 10,000 | 250,000 | |
| Buildings & Equipment | 400,000 | 300,000 | 9,000 | 709,000 | |
| Accumulated Depreciation | (135,000) | (85,000) | 3,000 | 27,000 | (244,000) |
| Investment in White Corporation Stock | 141,000 | 18,000 | 153,000 | - 0 | |
| 6,000 | |||||
| Total Assets | $ 737,000 | $ 365,000 | $40,000 | $186,000 | $956,000 |
| Accounts Payable | 90,000 | 25,000 | 115,000 | ||
| Notes Payable | 200,000 | 90,000 | 290,000 | ||
| Common Stock | 100,000 | 200,000 | 200,000 | 100,000 | |
| Retained Earnings | 347,000 | 50,000 | 50,000 | 3,000 | 347,000 |
| 3,000 | |||||
| NCI in NA of White Corporation | 100,000 | 104,000 | |||
| 4,000 | |||||
| Total Liabilities & Equity | $737,000 | $365,000 | $253,000 | $107,000 | $956,000 |
Consolidated Balance Sheet
| Greene Company and Subsidiary | ||||||
| Consolidated Balance Sheet | ||||||
| 12/31/17 | ||||||
| Cash and Accounts Receivable | 121,000 | |||||
| Inventory | 120,000 | |||||
| Land | 250,000 | |||||
| Buildings and Equipment | 709,000 | |||||
| Less: Accumilated Depreciation | (244,000) | 465,000 | ||||
| Total Assets | 956,000 | |||||
| Accounts Payable | 115,000 | |||||
| Notes Payable | 290,000 | |||||
| Accounts Payable | 115,000 | |||||
| Notes Payable | 290,000 | |||||
| Stockholders' Equity: | ||||||
| Controlling Interest: | ||||||
| Common Stock | 100,000 | |||||
| Retained Earnings | 347,000 | |||||
| Total Controlling Interest | 447,000 | |||||
| Noncontrolling Interest | 104,000 | |||||
| Total Stockholders' Equity | 551,000 | |||||
| Total Liabilities and Stockholders' Equity | 956,000 |
