Chap 1 = 100% Acquisition

Chap 2 = <50% Acquisition and no control

Chap 3 = >50% Acquisition and consolidated immediately after

Chap 4 = >50% Acquisition and consolidated a year after

Horizontal Integration = Same Business Lines and Markets

Vertical Integration = Different operations, but successive stages of production or distribution or both

Conglomeration = unrelated and diverse products or services

Business Acquisition = one company take over another

Merger = Business A buys Business B and Business B is dissolved

Consolidation = New Business buys Business A and B and dissolves both

Parent/Subsidiary Relationship =

1. Less than 100% of the firm is acquired OR

2. The acquired firm is not dissolved
3. AND > 50% of the subsidiary is acquired

Recording Guidelines: Assets acquired and Liabilities using Fair Value

If you buy a business that had bought a business, the sold businesss goodwill is dissolved.

Exceptions to FV rule:

1. Deferred tax assets and liabilities

2. Pensions and other benefits
3. Operating an capital leases

Levels of Influence:( (Percent Ownership of Voting Stock)

1. <20% = Presumes lack of significant influenceFair Value (Cost) Method(Dividends

Declared)
2. 20-50% = Presimes significant influenceEquity Method (proportionate share of investees
periodic earnings)
3. >50% = ControlPrepare Consolidated Statements

***DO NOT use equity method if there is a lack of significant influence

Parent must view subsidiary as if they are one entity. Subsidiary issues own set of statements to
investors. ONLY Parent must make consolidated statements.

Subsidiary = Possible to own 100% of subsidiary & it remains a subsidiary if the parent doesnt dissolve.
Consolidated Statements: You cannot have an investment in yourself, therefore, exclude investment
cost from Balance Sheet and Exclude subsidiary Capital Stock & Retained Earnings.

Cost = FV = BV.. No Goodwill or Bargain Purchase

BV FV and Cost > FV.Goodwill

BV FV and Cost < FV..Bargain Purchase

Non Controlling Interest = Equity

Non Controlling Interest Share = Income

Consolidated Balance Sheet:

1. Carry controlling share of net income line down to Retained Earnings section of the
worksheet without adjustment.
2. Carry ending Retained Earnings row down to balance sheet without adjustments
3. Parent RE under complete equity method is equal to consolidated RE
Chap 1:

Investment in Son Corp

Common Stock
APIC

Investment Expense
APIC
Cash

Receivables Recevables
Inventories or Inventories
Plant Assets Plant Assets
Goodwill (Plug) Accounts Payable
Accounts Payable Notes Payable
Notes Payable Investment in Son Corp
Investment in Son Corp Gain on Bargain Purchase

Balance Sheet: Start with BV (reconciled with Purchases) and add in FV

Chap 2

FV Method:

Investment in Company
Cash

Cash
Dividend Income

Dividend Income*** NOT NORMAL

Investment in Company

Allowance to adjust Avail-For-Sale Securities to Market Value

Unrealized Gain on Securities
Chap 2 Equity Method

Investment in Sid
Cash

Cash
Investment in Sid

Investment in Sid
Income From Sid

Balance: Cost

-Div

+Income

=Balance

1) Initial Entries
2) Implied Value (Excess)
3) Allocate Excess (Add GW)
4) Amortize (Current Income Adj & Unamortized Amount)
5) Calculate your share of their income
6) Calculate your share of their dividends
7) Journal Entries
8) Ending Balance T Account
9) Calculate your share of Book Value
10) Check Figure
Chap 3 : Consolidated Immediately

Investment

Cash

1) Implied Value
2) Allocate Excess
3) Amortize
4) Journal Entries
5) Balance Sheet

Workpaper Entries

APIC
Capital Stock
Retained Earnings
Unamortized Excess
Investment in Sub
NCI

Investment in Sub
Other Current Assets
Land
Plant Assets
Unamortized Excess
Chap 4 : Consolidated After a Year

1. Initial Entry
2. Implied Value
3. Allocate Excess
4. Amortize
5. Net Income of Sub
6. Your Share of Net Income & NCIS
7. Your Share of Dividends & Div NCI
8. Workpaper Entries

Income
Dividends
Investment

NCIS
Div
NCI

Capital Stock
Retained Earnings
Unamortized Excess
Investment in Sub
NCI

Inventory
Building
Equip
Goodwill
Unamortized Excess

COGS
Inventory
Depreciation Expense
Building
Depreciation Expense
Equipment

Accounts Payable
Accounts Receivable

Dividends Payable
Dividends Receivable