Accounting Final Project
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kaitlin_foster-clark_milestone_one_final_project.xlsxCompany Information (Given)
| Company Accounts | Parent Company | Subsidiary Company | |||
| 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 | |||
| *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. | |||||
| 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 | ||||
| 2. 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. | |||||
| 3. On December 27, 2012, Parent Company made a long-term loan to Subsidiary Company | |||||
| in the amount of | 100,000 | ||||
| 4. Subsidiary Company paid Parent Company | 7,000 | for Consulting Services. | |||
| Subsidiary Company considers this an Administrative Expense, and Parent Company considers | |||||
| it Sales Revenue. | |||||
| 5. 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 | ||
| Assumptions: | |||||
| 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. | |||||
Consolidation Entries
| Parent Company and Subsidiary Company | ||||||
| Consolidation Entries | ||||||
| Account Title | Debit | Credit | ||||
| Income from Subsidiary Company | 35,000 | |||||
| Investment in Subsidiary | 35,000 | |||||
| *Journal Entry to Record Parent Company's 100% Share of Subsidiary Company's 2012 Net Loss | ||||||
| Income from Subsidiary Company | 5,000 | |||||
| Investment in Subsidiary | 5,000 | |||||
| *Journal Entry to Eliminate Unrealized Gross Project on Inventory Purchases from Subsidiary Company | ||||||
| Common Stock | 200,000 | |||||
| Retained Earnings | 50,000 | |||||
| Income from Subsidiary Company | 40,000 | |||||
| Investment in Subsidiary | 210,000 | |||||
| *Basic Elimination Entry | ||||||
| Depreciable Assets | 20,000 | |||||
| Inventory | 20,000 | |||||
| Investment in Subsidiary | 40,000 | |||||
| *Excess Value (Differential) Reclassification Entry | ||||||
| Long-Term Notes Payable | 100,000 | |||||
| Long-Term Notes Receivable | 100,000 | |||||
| *Eliminate Intercompany Loan | ||||||
| Sales Revenue | 7,000 | |||||
| Administrative Expenses | 7,000 | |||||
| *Eliminate Consulting Service Intercompany Transaction | ||||||
| Current Liabilities | 10,000 | |||||
| Accounts Receivable | 10,000 | |||||
| *Eliminate Accounts Payable and Accounts Receivable Balances from Intercompany Sale of Inventory | ||||||
| Sales Revenue | 10,000 | |||||
| Cost of Goods Sold | 5,000 | |||||
| Inventory | 5,000 | |||||
| *Eliminate Intercompany Sale of Inventory Transaction | ||||||
| Accumulated Depreciation | 50,000 | |||||
| Depreciable Assets | 50,000 | |||||
| *Accumulated Depreciation Elimination Entry |
Consolidation Worksheet
| Parent Company and Subsidiary Company | ||||||||
| Consolidation Worksheet as of December 31, 2012 | ||||||||
| Parent Company | Subsidiary Company | Elimination Entries | Consolidated | |||||
| Debit | Credit | |||||||
| £ | £ | £ | £ | £ | ||||
| Income Statement | ||||||||
| Sales Revenue | 750,000 | 245,000 | 17,000 | 978,000 | ||||
| Less: Cost of Goods Sold | (330,000) | (160,000) | 5,000 | (485,000) | ||||
| Less: Selling Expenses | (100,000) | (45,000) | (145,000) | |||||
| Less: Administrative Expenses | (120,000) | (70,000) | 7,000 | (183,000) | ||||
| Less: Interest Expense | (24,000) | (5,000) | (29,000) | |||||
| Income from Subsidiary | (40,000) | 40,000 | 0 | |||||
| Net Income | 136,000 | (35,000) | 17,000 | 52,000 | 136,000 | |||
| Statement of Retained Earnings | ||||||||
| Beginning Balance | 482,000 | 50,000 | 50,000 | 482,000 | ||||
| Net Income | 136,000 | (35,000) | 17,000 | 52,000 | 136,000 | |||
| Ending Balance | 618,000 | 15,000 | 67,000 | 52,000 | 618,000 | |||
| Balance Sheet | ||||||||
| Cash | 10,000 | 4,000 | 14,000 | |||||
| Accounts Receivable | 25,000 | 10,000 | 10,000 | 25,000 | ||||
| Inventory | 30,000 | 12,000 | 20,000 | 5,000 | 57,000 | |||
| Short-Term Investments | 40,000 | 6,000 | 46,000 | |||||
| Prepaid Assets | 35,000 | 12,000 | 47,000 | |||||
| Investment in Subsidiary | 250,000 | 210,000 | 0 | |||||
| 40,000 | ||||||||
| Long-Term Notes Receivable | 150,000 | 14,000 | 100,000 | 64,000 | ||||
| Debt Service Fund | 50,000 | 50,000 | ||||||
| Depreciable Assets | 900,000 | 350,000 | 20,000 | 50,000 | 1,220,000 | |||
| Less: Accumulated Depreciation | (200,000) | (50,000) | 50,000 | (200,000) | ||||
| Intangible Assets | 45,000 | 20,000 | 65,000 | |||||
| Total Assets | 1,335,000 | 378,000 | 90,000 | 415,000 | 1,388,000 | |||
| Current Liabilities | 92,000 | 44,000 | 10,000 | 126,000 | ||||
| Long-Term Notes Payable | 225,000 | 119,000 | 100,000 | 244,000 | ||||
| Common Stock | 400,000 | 200,000 | 200,000 | 400,000 | ||||
| Retained Earnings | 618,000 | 15,000 | 67,000 | 52,000 | 618,000 | |||
| Total Liabilities & Equity | 1,335,000 | 378,000 | 377,000 | 52,000 | 1,388,000 |
