accounting-Assignment Choice #1: Consolidated Financial Statements Scenario

QUESTION

Here is the description for the assignment. It is comprised
of two parts.
Assignment Choice #1: Consolidated Financial Statements Scenario
The first part is a scenario covering the topic of consolidated
financial statements. The second part is the preparation of a consolidated
financial statement. You will submit both parts separately.
Part 1: Scenario –
Written
A new employee has been given responsibility for preparing the
consolidated financial statements of Sample Company. After attempting to work
alone for some time, the employee seeks assistance in gaining a better overall
understanding of the way in which the consolidation process works. You have
been asked to provide assistance in explaining the consolidation process. The
employee is asking you to respond to the following questions. Please provide
full explanations and use examples to support your work.
1.
Why must the
eliminating entries be entered in the consolidation worksheet each time
consolidated statements are prepared?
2.
How is the beginning-of-period
noncontrolling interest balance determined?
3.
How is the
end-of-period noncontrolling interest balance determined? Provide an example.
4.
Which of the
subsidiary’s account balances must always be eliminated? Why?
5.
Which of the parent
company’s account balances must always be eliminated? Why?

Your responses should
be complete, cite appropriate examples, well written, and in conformity
with the.csuglobal.edu/fileman/files/schoology/courses/global/documents/CSU-Global-Guide-to-Writing-and-APA-Requirements.pdf”>CSU-Global
Guide to Writing and APA Requirements.

Part 2: Problem
Solving – Journal
Using the data in
the Option 1 Spreadsheet (linked at the bottom of the page),
perform the accounting required for the acquisition of Little, Inc. by Big,
Inc. Within the worksheet, you are to:

1.
Select an accounting
method (either cost or equity) and explain why you selected this method
2.
Perform the required
journal entries
3.
Complete the
consolidation worksheet
4.
Prepare the
consolidated balance sheet, income statement, and statement of equity in good
form
Complete all work on the spreadsheet attached to this
assignment; it will be your only deliverable.
Make sure to label
your answers and provide support where needed. Your responses should be
complete, well written, and in conformity with the.csuglobal.edu/fileman/files/schoology/courses/global/documents/CSU-Global-Guide-to-Writing-and-APA-Requirements.pdf”>CSU-Global
Guide to Writing and APA Requirements.

The information for part 2 (from the spreadsheet) is on page
2.

Part
II

Assume that Big Company decides to
acquire 100% of Little Company stock for $200,000. Prepare the consolidated
balance sheet and any supporting worksheets.

Big Company Balance Sheet

Assets, Liabilities & Equities

Book Value

Cash

$500,000

AR

$10,000

Inventory

$50,000

Land

$40,000

PP&E

$400,000

Accumulated Depreciation

-$150,000

Patent

$0

Total Assets

$850,000

AP

$110,000

Common Stock

$395,000

Additional Paid In Capital

$300,000

Retained Earnings

$45,000

Total Liabilities
& Equity

$850,000

Little Company Balance Sheet

Assets, Liabilities & Equities

Book Value

Cash

$35,000

AR

$10,000

Inventory

$65,000

Land

$40,000

PP&E

$40,000

Accumulated Depreciation

-$5,000

Patent

$0

Total Assets

$185,000

AP

$25,000

Common Stock

$25,000

Additional Paid In Capital

$35,000

Retained Earnings

$100,000

Total Liabilities
& Equity

$185,000

Assume that Fair Value of all
noncash assets are 25% greater than book value

SEE THE NEXT PAGE FOR AN IMPORTANT NOTE.
NOTE: THE INSTRUCTIONS
AT THE TOP OF PAGE 2 ONLY MENTION THE BALANCE SHEET, BUT IF YOU READ THE
INSTRUCTIONS ON PAGE 1, YOU WILL SEE THAT THE CONSOLIDATED BALANCE SHEET, INCOME
STATEMENT, AND STATEMENT OF EQUITY (IN GOOD FORM) MUST BE PREPARED. KEEP IN
MIND THAT THERE ARE 2 PARTS TO THIS ASSIGNMENT. ALSO, KEEP IN MIND THAT THERE ARE
4 REQUIREMENTS FOR PART 2. THE CONSOLIDATED FINANCIAL STATEMENTS IS JUST ONE OF
THEM.

ANSWER:

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