Introduction: Consolidated income statement is the combination of income, revenue and expenses of holding companies and its subsidiaries depicting the overall scenario of the aggregate of the company as a whole.
To prepare:The worksheet necessary to produce the consolidated financial statements for the year ended December 31, 2016, and to 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 ($) | Total |
Buildings | 20 | 6,500 | 6,500 | 13,000 | 19,500 |
Equipment | 5 | 10,000 | 10,000 | 20,000 | 30,000 |
Total Amortizations | 16,500 | 16,500 | 33,000 | 49,500 |
Following is the computation of intercompany inventory profit:
Particulars | Parent Amount | Parent % | Parent Profit ($) | Sub Amount ($) | Sub Percent | Sub Profit ($) |
Beginning | - | 0% | - | 12,000 | 25% | 3,000 |
Ending | - | 0% | - | 9,000 | 25% | 2,250 |
Now, following is the computation of internally generated income of the company:
For Company S,
Given: Sale of S Company is $350,000, COGS is $230,000,
For Company P,
Given: Sales of P Company is $900,000, COGS is $530,000, Depreciation expenses on building are $30,000, Depreciation expenses on equipment are $15,000 and other expenses are $155,000.
Following is the computationof income distribution of subsidiary of S Company:
Particulars | Amount ($) | Particulars | Amount ($) |
Amortizations
Ending Inventory profit Interest adjustment, bonds | 16,500
2,500 998 | Internally Generated Net Income
Beginning Inventory Profit Adjusted Income Non-Controlling Interests share Non-controlling Interest | 17348
3,000 350 20% 70 |
Following is the computation of income distribution of parent P Company:
Particulars | Amount ($) | Particulars | Amount ($) |
Internally Generated Income
Adjusted Income Share (S Company) (80% of $15,987) Controlling Interest | 178,650
280 178,930 |
Worksheet:
Particulars | Elimination and Adjustments | Consolidated B/S ($) | NCI ($) | Controlling R/E ($) | Consolidated B/S ($) | |||
P ($) | S ($) | Debit ($) | Credit ($) | |||||
Cash | 290486 | 99347 | 389833 | |||||
120000 | 91000 | 6000 | 205000 | |||||
Inventory | 140000 | 55000 | 2500 | 192500 | ||||
Land | 200000 | 60000 | 260000 | |||||
Investment in S stock | 435737 | 13878 | ||||||
- | (8000) | |||||||
- | 189859 | |||||||
- | 240000 | |||||||
Investment in S Bonds | 96760 | 96760 | ||||||
Buildings | 600000 | 100000 | 130000 | 830000 | ||||
(340000) | (45000) | 19500 | (404500) | |||||
Equipment | 150000 | 80000 | 50000 | 280000 | ||||
Accumulated Depreciation | (105000) | (60000) | 30000 | (195000) | ||||
120000 | 120000 | |||||||
Accounts Payable | (40000) | (34000) | 6000 | (68000) | ||||
Bonds Payable | (100000) | 100000 | ||||||
Discount (Premium) | (1675) | 1675 | ||||||
Common Stock ($1 par) S. Co. | (10000) | 8000 | ||||||
Paid-in-capital in excess of par - S. Co. | (90000) | 72000 | (2000) | |||||
(137324) | 109859 | (18000) | ||||||
6600 | 560000 | |||||||
600 | 1183 | |||||||
Common Stock ($1 par) P Company | (100000) | (81448) | (100000) | |||||
Paid-in-capital in excess of Par - P. Co. | (800000) | (800000) | ||||||
Retained Earnings | (475455) | 26400 | ||||||
2400 | (451385) | |||||||
4730 | ||||||||
Sales | (900000) | (350000) | 25000 | (1225000) | ||||
Cost of goods sold | 530000 | 230000 | 25000 | |||||
2500 | 3000 | 734500 | ||||||
Depreciation - Building | 30000 | 5000 | 6500 | 41000 | ||||
Depreciation - Equipment | 15000 | 10000 | 10000 | 35000 | ||||
Other Expenses | 155000 | 80000 | 235000 | |||||
Interest Expense | 7652 | 7652 | ||||||
Interest Revenue | (8650) | 8650 | ||||||
Subsidiary Income | (13878) | 13878 | ||||||
Dividend Declare - S. Co. | 10000 | 8000 | 2000 | |||||
Dividend Declare - P. Co. | 20000 | 20000 | ||||||
Total | 0 | 0 | 708062 | 70862 | ||||
Consolidated Net Income | (179000) | |||||||
Non - Controlling Interest | 70 | 70 | ||||||
Controlling Interest | 178930 | (178930) | ||||||
Total Non-Controlling Interests | (99518) | (99518) | ||||||
Retained Earnings | (610315) | (610315) | ||||||
Total | 0 |
Eliminations and Adjustments are made in the following:
- Current-year subsidiary income.
- Current-year dividend.
- Eliminate controlling interest in subsidiary equity.
- Distribute excess and adjust NCI.
- Eliminate intercompany sales during the current period.
- Eliminate intercompany unpaid trade accounts.
- Defer beginning inventory profit.
- Defer ending inventory profit.
Computation of proof for the Elimination of Bonds:
Particulars | Amount ($) | Amount ($) |
Gain remaining at year (end): | ||
Carrying Value at December 31, 2016 | 101,675 | |
Investment in bonds at December 31, 2016 | 96,760 | 4,915 |
Loss amortized during the year: | ||
Interest expense eliminated | 8,650 | |
Interest Revenue Eliminated | 7,652 | 998 |
Gain at January 1, 2016 | 5,913 |
Want to see more full solutions like this?
Chapter 5 Solutions
ADVANCED ACCOUNTING
- Kensington Textiles, Inc. manufactures customized tablecloths. An experienced worker can sew and embroider 10 tablecloths per hour. Due to the repetitive nature of the work, employees take a 10-minute break after every 10 tablecloths. Additionally, before starting each batch of 10 tablecloths, workers spend 8 minutes cleaning and setting up their sewing machines. Calculate the standard quantity of direct labor for one tablecloth.arrow_forwardSolvearrow_forwardProblem: The bank statement balance of $7,000 does not include a check outstanding of $1,000, a deposit in transit of $275, and another company's $250 check erroneously charged against your firm's account. The reconciled bank balance is__?arrow_forward
- Please help mearrow_forwardDo fast answer of this accounting questionsarrow_forwardNick and Partners, a law firm, worked on a total of 1,000 cases this month, 800 of which were completed during the period. The remaining cases were 40% complete. The firm incurred $180,000 in direct labor and overhead costs during the period and had $4,800 in direct labor and overhead costs in beginning inventory. Using the weighted average method, what was the total cost of cases completed during the period?arrow_forward
- Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College