Advanced Accounting I

Consolidated Techniques
& Procedures
(Part – 1)
Wahdan Arum Inawati
 Advanced Accounting I

CAPAIAN
PEMBELAJARAN
Mampu membuat laporan konsolidasi
berdasarkan equity method setelah induk
perusahaan mengakuisisi anak perusahaan
pada tahun akusisi dan setelahnya
 Advanced Accounting I

CONTENTS OF CH. 4
01 02
Adjustment & Consolidated
Elimination Workpaper –
Journal Pop & Son

03 04
Consolidated Consolidated
Workpaper – Statement of
Pam & Sun Cash Flows
 Advanced Accounting I

01
ADJUSTMENT &
ELIMINATION JOURNAL
 Advanced Accounting I

7 JOURNALS :

1) Adjustment for errors and omissions in the separate

parent and subsidiary statements
2) Eliminate intercompany profits and losses
3) Eliminate income and dividend from subsidiary
4) Adjustment to record noncontrolling interest in income
and dividend from subsidiary
5) Eliminate reciprocal investment in subsidiary and
equity
6) Adjustment for ammortization
7) Eliminate other reciprocal
Ex : Receivable – Payable, Revenue – Expense, etc.
 Advanced Accounting I

WORKPAPER CONSOLIDATED
1. Income Statement
2. Statement of Retained
Earnings
3. Balance Sheet
4. Cash Flow
 Advanced Accounting I

02
CONSOLIDATED
WORKPAPER –
POP & SON
 Advanced Accounting I

POP & SON

Pop Company maintains its 80% ownership interest
in Son throughout 2017. Investment cost = $ 176.000
at Jan 1, 2017.
Son as subsidiary, in 2017 had net income $ 50.000
and declared dividend $ 30.000.

No Goodwill. Excess of Implied Value over BV Son will

be recorded as patent with useful life 10 years. Patent
was recorded undervalued.
 Advanced Accounting I

POP & SON

Here information in Jan 1, 2017 :
Retained Earnings – Son $ 60.000
Capital Stock – Son $ 120.000

The only intercompany transaction between Pop and

Son during 2017 was $ 20.000 non-interest bearing
loan to Son during the third quarter of the year.
 Advanced Accounting I

POP & SON (Answer)

Implied Value = Investment Cost / % Controlling
= $ 176.000 / 80% = $ 220.000
BV Net Asset Son = RE Son + Capital Stock Son
= $ 60.000 + $ 120.000 = $ 180.000

Excess = Patent
= $ 220.000 - $ 180.000 = $ 40.000
 Advanced Accounting I

POP & SON (Answer)

INVESTMENT INCOME POP (80%)
Pengakuan Earnings ($ 50.000 x 80%) = $ 40.000
(+) Selisih Amortisasi
Patent ($40.000 / 10 years) x 80% = ($ 3.200) undervalued
Investment Income Pop = $ 36.800

NONCONTROLLING INTEREST SHARE (20%)

Pengakuan Earnings ($ 50.000 x 20%) = $ 10.000
(+) Selisih Amortisasi
Patent ($40.000 / 10 years) x 20% = ($ 800) undervalued
Noncontrolling Interest Share = $ 9.200
 POP & SON (Answer)
INVESTMENT AKHIR POP (80%)
Investment Awal = $ 176.000
(-) Dividend ($ 30.000 x 80%) = ($ 24.000)
(+) Investment Income = $ 36.800
Investment Akhir Pop = $ 188.800

NONCONTROLLING INTEREST AKHIR (20%)

Noncontrolling Interest Awal
(Implied Value x %Noncontrolling
= $ 220.000 x 20%) = $ 44.000
(-) Dividend ($ 30.000 x 20%) = ($ 6.000)
(+) Noncontrolling Interest Share = $ 9.200
Noncontrolling Interest Akhir = $ 47.200
 Advanced Accounting I

POP & SON (Answer)

1) Adjustment for errors and omissions in the separate
parent and subsidiary statements → NO ENTRY
2) Eliminate intercompany profits and losses → NO ENTRY
3) Eliminate income and dividend from subsidiary
Income from Son (-R, -SE) 36.800
Dividends (+SE) 24.000
Investment in Son (-A) 12.800
4) Adjustment to record noncontrolling interest in income
and dividend from subsidiary
Noncontrolling interest share (-SE) 9.200
Dividends (+SE) 6.000
Noncontrolling interest – Ending (+SE) 3.200
 Advanced Accounting I

POP & SON (Answer)

5) Eliminate reciprocal investment in subsidiary and equity
Capital stock, Son (-SE) 120.000
Retained earnings, Son - Beginning (-SE) 60.000
Patents (+A) 40.000
Investment in Son (-A) 176.000
Noncontrolling interest - Beginning (+SE) 44.000

6) Adjustment for amortization

Amortization Expense (E, -SE) 4.000
Patents (-A) 4.000
 Advanced Accounting I

POP & SON (Answer)

7) Eliminate other reciprocal
Ex : Receivable – Payable, Revenue – Expense, etc.

non-interest bearing loan to Son → Receivable – Payable

Note payable – Pop (-L) 20.000

Note receivable – Sop (-A) 20.000

 Advanced Accounting I
Pop & Subsidiary Worksheet (thousand)
Year ended Dec 31, 2017 Pop Son Dr Cr Consol
Income statement:
Revenues 500 130 630
Income from Son 36,8 36,8
Expenses (400) (80) 4 (484)
Noncontrolling interest share 9,2 (9,2)

Net income/ Controlling share 136,8 50 136,8

Statement of retained
earnings:
Retained Earnings - Beginning 10 60 60 10
Add : Net Income 136,8 50 136,8
Deduct : Dividends (60) (30) 24 (60)
6
Ending retained earnings 86,8 80 86,8
 Advanced Accounting I
Pop & Subsidiary Worksheet (thousand)
Balance sheet Dec 31, 2017 Pop Son Dr. Cr. Consol
Cash 78 20 98
Other current assets 180 100 20 260
Investment in Son 188,8 12,8
176
Plant & equipment, net 500 140 640
Patents 40 4 36
Total 946,8 260 1.034
Liabilities 160 60 20 200
Capital stock 700 120 120 700
Retained Earnings - Ending 86,8 80 86,8
Noncontrolling interest, Jan.1 44
Noncontrolling interest, Dec. 31 3,2 47,2
Total 946,8 260 1.034
 Advanced Accounting I

03
CONSOLIDATED
WORKPAPER – PAM &
SUN
 Advanced Accounting I

PAM & SUN

Pam acquired its equity interest 90% in
Sun on December 31, 2016, for $
360.000 cash, when Sun’s stockholders
equity consisted of $ 200.000 capital
stock and $ 50.000 retained earnings.

This price implies a total value of

$ 400.000 ($ 360.000 / 90%).
 Advanced Accounting I

PAM & SUN

On the date that Sun became subsidiary of Pam, the
following assets of Sun had book values different from
their fair values (in thousands) :
Fair Book Amortization Undervalued
Value Value Period (Over)
Inventories $ 60 $ 50 Sold in 2017 $ 10
Land 60 30 None 30
Buildings – Net 180 100 20 years 80
Equipment - Net 70 90 10 years (20)
Total $ 370 $ 270 $ 100
 Advanced Accounting I

PAM & SUN

Sun reports $ 60.000 net income for 2017 and declares
dividends of $ 10.000 on Jun 1 and Dec 1 ($ 20.000 total for
2017). Sun pays the Jun 1 dividend on Jul 1, but the Dec 1
remains unpaid at Dec 31, 2017.
During 2017, Sun sells the undervalued inventory items,
but the undervalued land and buildings and overvalued
equipment are still in use by Sun at Dec 31 2017.

During 2017, Sun borrows $ 20.000 from Pam on a non-

interest-bearing-note. Sun repays the note on Dec 30, but
the repayment check to Pam was in transit and was not
reflected in Pam’s separate balance sheet at Dec 31, 2017.
 Advanced Accounting I

PAM & SUN (Answer)

Implied Value = $ 400.000
(-) BV Net Asset =($ 250.000)
($ 200.000 + $ 50.000)
Excess = $ 150.000

Total Selisih Amortisasi = $ 100.000

GOODWILL = $ 50.000
 Advanced Accounting I

PAM & SUN (Answer)

INVESTMENT INCOME PAM (90%)
Pengakuan Earnings ($ 60.000 x 90%) = $ 54.000
(+) Selisih Amortisasi =
Inventory = $10.000 x 90% (u) = ($9.000)
Buildings = [$ 80.000 x 90%] / 20 th (u) = ($ 3.600)
Equipment = [$ 20.000 x 90%] / 10 th(o) = $ 1.800
Total Selisih Amortisasi = ($ 10.800)
Investment Income = $ 43.200
 Advanced Accounting I

PAM & SUN (Answer)

NONCONTROLLING INTEREST SHARE (10%)
Pengakuan Earnings ($ 60.000 x 10%) = $ 6.000
(+) Selisih Amortisasi =
Inventory = $10.000 x 10% (u) = ($1.000)
Buildings = [$ 80.000 x 10%] / 20 th (u) = ($ 400)
Equipment = [$ 20.000 x 10%] / 10 th(o) = $ 200
Total Selisih Amortisasi = ($ 1.200)
Noncontrolling Interest Share = $ 4.800
 PAM & SUN (Answer)
INVESTMENT AKHIR PAM (90%)
Investment Awal = $ 360.000
(-) Dividend ($ 10.000 x 90%) = ($ 9.000)
(+) Investment Income = $ 43.200
Investment Akhir Pam = $ 394.200

NONCONTROLLING INTEREST AKHIR (10%)

Noncontrolling Interest Awal
(Implied Value x %Noncontrolling
= $ 400.000 x 10%) = $ 40.000
(-) Dividend ($ 10.000 x 10%) = ($ 1.000)
(+) Noncontrolling Interest Share = $ 4.800
Noncontrolling Interest Akhir = $ 43.800
 Advanced Accounting I

PAM & SUN (Answer)

JURNAL AKUISISI
1. Mencatat Investasi atau Akuisisi Sun (31 Dec 2016)

Investment in Sun (+A) 360.000

Cash (-A) 360.000

2. Mencatat Dividend yang diterima dari Sun (1 Jul 2017)
$ 10.000 x 90% = $ 9.000
Cash (+A) 9.000

Investment in Sun (-A) 9.000

 Advanced Accounting I

PAM & SUN (Answer)

3. Mencatat Pengakuan Earnings (31 Dec 2017)
$ 60.000 x 90% = $ 54.000
Investment in Sun (+A) 54.000

Income From Sun (R, +SE) 54.000

 Advanced Accounting I

PAM & SUN (Answer)

1) Adjustment for errors and omissions in the separate
parent and subsidiary statements
Dividend Receivable, Pam (+A) 9.000
Investment in Sun (-A) 9.000

Cash (+A) 20.000

Notes Receivable, Sun (-A) 20.000
2) Eliminate intercompany profits and losses → NO ENTRY
 Advanced Accounting I

PAM & SUN (Answer)

3) Eliminate income and dividend from subsidiary
Income from Sun (-R, -SE) 43.200
Dividends (+SE) 18.000
Investment in Sun (-A) 25.200

4) Adjustment to record noncontrolling interest in income

and dividend from subsidiary
Noncontrolling interest share (-SE) 4.800
Dividends (+SE) 2.000
Noncontrolling interest – Ending (+SE) 2.800
 Advanced Accounting I

PAM & SUN (Answer)

5) Eliminate reciprocal investment in subsidiary and equity
Capital stock, Sun (-SE) 50.000
Retained earnings, Sun - Beginning (-SE) 200.000
Unamortized Excess (+A) 150.000
Investment in Sun (-A) 360.000
Noncontrolling interest - Beginning (+SE) 40.000
Eliminate Unamortized Excess
Cost of Good Sold (E) 10.000
Land (+A) 30.000
Building – Net (+A) 80.000
Goodwill (+A) 50.000
Equipment – Net (-A) 20.000
Unamortized Excess (-A) 150.000
 Advanced Accounting I

PAM & SUN (Answer)

6) Adjustment for amortization
a) Building Depreciation
Operating Expense (+E) 4.000
Buildings - Net (-A) 4.000

b) Equipment Depreciation
Equipment – Net (+A) 2.000
Operating Expense (-E) 2.000
 Advanced Accounting I

PAM & SUN (Answer)

7) Eliminate other reciprocal
Ex : Receivable – Payable, Revenue – Expense, etc

Dividend payable, Sun (-L) 9.000

Dividend receivable, Pam (-A) 9.000

Advanced Accounting I
Advanced Accounting I
 Advanced Accounting I

LATIHAN
SOAL
 Advanced Accounting I

E 4.2 (Consolidation Under Equity Method)

Nur PJSC purchased 80 percent outstanding common stock of
Salim PJSC for $800.000 cash on January 1, 2014.
The total net assets of Salim PJSC at the time of the acquisition
were $900.000. At that time, the identified net assets book values
of Salim PJSC was equal to fair values, except for an unrecorded
patent to the amount of $20.000 with a 10-year remaining useful
life.

REQUIRED :
1. Determine the amount of goodwill.
2.Determine the amount of Patent that should appear in the
consolidated balance sheet at December 31, 2017.
 Advanced Accounting I

E 4.4 (Excess Assigned To Identifiable Net Assets)

Palat Ltd. paid $3.600.000 cash to acquire 90 percent of Sanun
Ltd.’s voting stock on January 1, 2014. Sanun’s total stockholders’
equity at the time was $5.000.000. The differences between the
book values and fair values of Sanun’s assets and liabilities at
January 1, 2014 are presented below:

■ Inventory (sold in the current year) was overvalued by $200.000.

■ Land was overvalued by $500.000.
■Equipment (remaining life of 4 years) was undervalued by
$400.000.
■ Building (remaining life of 5 years) was overvalued by $750.000.
■ Notes receivable (due in 4 years) was overvalued by $200.000.
 Advanced Accounting I

E 4.4 (Excess Assigned To Identifiable Net Assets)

Sanun Ltd. declared dividends of $150,000 each in March
and June 2014. Its net income for the year was $1,000,000.

REQUIRED :
1. Calculate the goodwill that should be reported in the
consolidated balance sheet.
2. Calculate income from Sanun Ltd. for 2014.
3. Calculate the balance of the Investment in Sanun Ltd.
account at December 31, 2014.
4. Calculate noncontrolling interest balance at December
31, 2014.
 Advanced Accounting I

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