Prepare the consolidated balance sheet and eliminating entries on January 1, 2019. On January 5, 20x9, Parent Company acquired 80% of the outstanding shares of Subsidiary Company forP350,000. The financial statements of Parent and Subsidiary Company before the acquisition follow:ParentSubsidiaryParentCompanyCompanyValueCash700,000100,000100,000Inventory300,00050,00055,000PPE1,000,000350,000365,000Liabilities500,000200,000200,000Outstanding SharesRetained earnings1,000,000200,000500,000100,000Financial statements for Parent and Subsidiary for the year ended December 31, 2x19 follow:INCOME AND RETAINED EARNINGSParentSubsidiaryCompanyCompanySales800,000550,000Dividend income40,000Cost of salesOperating expenses(480,000)(60,000)300,000(250,000)(150,000)Net income150,000Retained earnings, Jan 1, 2019500,000100,000Dividends declared(100,000)(50,000)Retained earnings end700,000200,000BALANCE SHEETCash300,000125,000Receivables100,00030,000Inventory650,00045,000Investment in Subsidiary350,000PPE900,0002,300,000350,000Total550,000Liabilities600,000150,000Outstanding sharesRetained earnings1,000,000200,000700,000200,000Total2,300,000550,000Additional Information:The undervalued PPE of Subsidiary on the date of acquisition has a remaining useful life of 5-years.• Subsidiary Company owes Parent Company P5,000 on December 31, 2x19. Consolidated Balance SheetJANUARY 1, 2019BALANCE SHEETParent Company Subsidiary CompanyDebitsDebitsCONSOLIDATED BALANCECash300,000100,000Receivables100,000Inventory650,00050,000Investment in Subsidiary350,000PPE900,000350,000Total2,300,000500,000Liabilities600,000200,000Outstanding shares1,000,000200,000Retained earnings700,000100,000Total2,300,000500,000

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Description: Prepare the consolidated balance sheet and eliminating entries on January 1, 2019. On January 5, 20x9, Parent Company acquired 80% of the outstanding shares of Subsidiary Company forP350,000. The financial statements of Parent and Subsidiary Company

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Answered: On January 5, 20x9, Parent Company…

FINANCIAL ACCOUNTING

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ISBN:9781259964947

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Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Prepare the consolidated balance sheet and eliminating entries on January 1, 2019.

On January 5, 20x9, Parent Company acquired 80% of the outstanding shares of Subsidiary Company for
P350,000. The financial statements of Parent and Subsidiary Company before the acquisition follow:
Parent
Subsidiary
Parent
Company
Company
Value
Cash
700,000
100,000
100,000
Inventory
300,000
50,000
55,000
PPE
1,000,000
350,000
365,000
Liabilities
500,000
200,000
200,000
Outstanding Shares
Retained earnings
1,000,000
200,000
500,000
100,000
Financial statements for Parent and Subsidiary for the year ended December 31, 2x19 follow:
INCOME AND RETAINED EARNINGS
Parent
Subsidiary
Company
Company
Sales
800,000
550,000
Dividend income
40,000
Cost of sales
Operating expenses
(480,000)
(60,000)
300,000
(250,000)
(150,000)
Net income
150,000
Retained earnings, Jan 1, 2019
500,000
100,000
Dividends declared
(100,000)
(50,000)
Retained earnings end
700,000
200,000
BALANCE SHEET
Cash
300,000
125,000
Receivables
100,000
30,000
Inventory
650,000
45,000
Investment in Subsidiary
350,000
PPE
900,000
2,300,000
350,000
Total
550,000
Liabilities
600,000
150,000
Outstanding shares
Retained earnings
1,000,000
200,000
700,000
200,000
Total
2,300,000
550,000
Additional Information:
The undervalued PPE of Subsidiary on the date of acquisition has a remaining useful life of 5-
years.
• Subsidiary Company owes Parent Company P5,000 on December 31, 2x19.

Consolidated Balance Sheet
JANUARY 1, 2019
BALANCE SHEET
Parent Company Subsidiary Company
Debits
Debits
CONSOLIDATED BALANCE
Cash
300,000
100,000
Receivables
100,000
Inventory
650,000
50,000
Investment in Subsidiary
350,000
PPE
900,000
350,000
Total
2,300,000
500,000
Liabilities
600,000
200,000
Outstanding shares
1,000,000
200,000
Retained earnings
700,000
100,000
Total
2,300,000
500,000

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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