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This 6 page Class Notes was uploaded by Albina Kertzmann on Friday October 30, 2015. The Class Notes belongs to SCH at University of Massachusetts taught by Staff in Fall. Since its upload, it has received 55 views. For similar materials see /class/232240/sch-university-of-massachusetts in Business, management at University of Massachusetts.
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Date Created: 10/30/15
SCHMGMT 523 Lecture Outline Chapter 4 Consolidation techniques and procedures 1 Consolidating working paper format a Consolidating preclosing trial balances of parent and subsidiaries b Consolidating financial statements balance sheet income statement and retained earnings statement of parent and subsidiaries Cnsdicbtirg vxcrk paper rar d state 2 Consolidating adjustments CJEs The consolidating working paper entries in this chapter may be summarized as follows 1 Restore the beginning of the period balance of the Investment in S account and remove the income and dividends from S to P 2 Eliminate the beginning of the period Investment in S account and the beginning shareholders equity of S If applicable recognize the beginning unamortized cost differential and the minority interest in S s shareholders equity 3 Update the minority interest for the current year s income and dividends from S 4 Allocate the unamortized cost differentials as of the start of the period 5 Recognize the current period s amortization of the differentials 6 Eliminate other reciprocal balances e g intercompany accounts receivable and payable 3 Examples of consolidating working papers A First example Consolidation at the end of the acquisition year with minority interest and a cost differential CaeA 051 Second example Consolidation at the end of the subsequent year same case as A above CaseB 0 Third example Comprehensive illustration with allocation and amortization of cost differentials corrections of errors reciprocal balances and minority interests CaeC 4 Preparation of a consolidated statement of cash flows indirect method The format and content of cash flow statements have been developed in prerequisite courses Our focus is on additional items in the statement that are specific to consolidated financial statements ie a Undistributed earnings of equity method investees unconsolidated a subtraction in computing operating cash ows b Minority interests in the income of consolidated subsidiaries an addition in computing operating cash ows c DiVidends paid by consolidated subsidiaries to minority shareholders a subtraction in computing nancing cash ows L ltsdidated Gash Flowsaterrert SCHMGMT 523 Lecture Outline Chapter 5 Consolidation with Intercompany Profits in Inventories Transactions with 100owned af liate no minority interests adjustments are identical for downstream and upstream sales 1 Elimination of intercompany sales and cost of sales Mcruso t waeerrt Min 2 Elimination of ending inventory pro ts Mcruso t waeerrt Min 3 Elimination of beginning and ending inventory pro ts Mcruso t waeerrt M im Transactions with majorityowned af liate minority interests adjustments differ for downstream and upstream sales Distinction between downstream and upstream sales Eli Mcruso t waeerrt Mm Downstream sales equity method entries and consolidating adjustments CJEs l Elimination of ending inventory pro ts Mcruso t waeerrt Mm 2 Elimination of beginning and ending inventory pro ts Mcruso t waeerrt Mia Upstream sales equity method entries and consolidating adjustments CJEs Mcruso t waeerrt mm Summary and comparison of equitymethod and consolidating entries downstream vs upstream sales
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