Introduction:
Subsidiary company: It is also called as Daughter Company. A subsidiary company is owned and controlled by another company. This kind of company can be one of the several owners or may also be the sole owner. If the holding company or a parental company own a hundred percent of another company, then it is regarded as a ‘wholly-owned subsidiary’.
Consolidation is the process of combining the financial statement of the parent company and its subsidiaries. A consolidated
To prepare: The worksheet necessary to produce the consolidated financial statements for postman Company and its subsidiary Spartan Company for the year ended December 31, 2015. Include the determination and distribution of excess and income distribution schedules.

Explanation of Solution
Adjustments of accounts to be amortized:
Accounts Adjustments to be Amortized | Life (Years) | Annual Amount ($) | Current year ($) | Prior Years ($) | Total |
Buildings | 20 | 6,500 | 6,500 | 6,500 | 13,000 |
Equipment | 5 | 10,000 | 10,000 | 10,000 | 20,000 |
Total Amortizations | 16,500 | 16,500 | 16,500 | 33,000 |
Following is the computation of intercompany inventory profit:
Particulars | Parent Amount | Parent % | Parent Profit ($) | Sub Amount ($) | Sub Percent | Sub Profit ($) |
Beginning | - | 0% | - | 9,000 | 25% | 2,250 |
Ending | - | 0% | - | 12,000 | 25% | 3,000 |
Now, following is the computation of internally generated income of the company:
For Company S,
Given: Sale of S Company is $320,000, COGS is $200,000,
For Company P,
Given: Sales of P Company is $850,000, COGS is $500,000, Depreciation expenses on building are $30,000, Depreciation expenses on equipment are $15,000 and other expenses are $140,000.
Following is the computation of income distribution of subsidiary of S Company:
Particulars | Amount ($) | Particulars | Amount ($) |
Amortizations Ending Inventory profit Interest adjustment, bonds | 16,500 3,000 920 | Internally Generated Net Income Beginning Inventory Profit Gain on Bond Retirement Adjusted Income Non-Controlling Interests share Non-controlling Interest | 27,324 2,250 6,883 15987 20% 3,197 |
Following is the computation of income distribution of parent P Company:
Particulars | Amount ($) | Particulars | Amount ($) |
Internally Generated Income Adjusted Income Share (S Company) (80% of $15,987) Controlling Interest | 173,596 12,790 186,386 |
WORKSHEET:
Particulars | Elimination and Adjustments | Consolidated B/S ($) | NCI ($) | Controlling R/E ($) | Consolidated B/S ($) | |||
P ($) | S ($) | Debit ($) | Credit ($) | |||||
Cash | 1,44,486 | 99347 | 243833 | |||||
90000 | 60000 | 7000 | 143000 | |||||
Inventory | 120000 | 55000 | 3000 | 172000 | ||||
Land | 200000 | 60000 | 260000 | |||||
Investment in S stock | 429859 | 21859 | ||||||
- | 8000 | |||||||
- | 176000 | |||||||
- | 240000 | |||||||
Investment in S Bonds | 96110 | 96110 | ||||||
Buildings | 600000 | 100000 | 130000 | 830000 | ||||
-310000 | -40000 | 13000 | -363000 | |||||
Equipment | 150000 | 80000 | 50000 | -280000 | ||||
Accumulated Depreciation | -90000 | -50000 | 20000 | -160000 | ||||
120000 | 120000 | |||||||
Accounts Payable | -55000 | -25000 | 7000 | -73000 | ||||
Bonds Payable | -100000 | 100000 | ||||||
Discount (Premium) | 2023 | 2023 | ||||||
Common Stock ($1 par) S. Co. | -10000 | 8000 | -2000 | |||||
Paid-in-capital in excess of par - S. Co. | -90000 | 72000 | -18000 | |||||
-120000 | 96000 | 60000 | ||||||
3300 | ||||||||
450 | -80250 | |||||||
Common Stock | -100000 | -100000 | ||||||
Paid-in-capital in excess of Par - P. Co. | 800000 | -800000 | ||||||
Retained Earnings | 300000 | 13200 | ||||||
51800 | -285000 | |||||||
Gain on Bond Retirement | 6833 | -6833 | ||||||
Sales | -850000 | -320000 | 20000 | -1150000 | ||||
Cost of goods sold | 500000 | 200000 | 20000 | |||||
3000 | 52250 | 680750 | ||||||
Depreciation - Building | 30000 | 5000 | 6500 | 41500 | ||||
Depreciation - Equipment | 15000 | 10000 | 10000 | 35000 | ||||
Other Expenses | 140000 | 70000 | 210000 | |||||
Interest Expense | 7676 | 57676 | ||||||
Interest Revenue | -8596 | 8596 | ||||||
Subsidiary Income | -21859 | 21859 | ||||||
Dividend Declare - S. Co. | 10000 | 8000 | 2000 | |||||
Dividend Declare - P. Co. | 20000 | 20000 | ||||||
Total | 0 | 0 | 681726 | 681728 | ||||
Consolidated Net Income | -189583 | |||||||
Non - Controlling Interest | 3187 | -3197 | ||||||
Controlling Interest | 186386 | -186386 | ||||||
Total Non-Controlling Interests | -101477 | -101447 | ||||||
Retained Earnings - Controlling interest, 31 Dec, 2015 | -451386 | -451386 | ||||||
Total | 0 |
Eliminations and Adjustments are made in the following:
- Current-year subsidiary income.
- Current-year dividend.
- Eliminate controlling interest in subsidiary equity.
- Distribute excess and adjust NCI.
- Eliminate intercompany sales during the current period.
- Eliminate intercompany unpaid trade accounts.
- Defer beginning inventory profit.
- Defer ending inventory profit.
- Eliminate intercompany bonds.
Computation of proof for the Elimination of Bonds:
Particulars | Amount ($) | Amount ($) |
Gain remaining at year (end): | ||
Carrying Value at December 31, 2015 | 102,023 | |
Investment in bonds at December 31, 2015 | 96,110 | 5,913 |
Loss amortized during the year: | ||
Interest expense eliminated | 8,596 | |
Interest Revenue Eliminated | 7,676 | 920 |
Gain at January 1, 2015 | 6,833 |
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