Consolidated Financial

Statements
Wholly Owned Corporation
Subsequent Date of Acquisition
Elimination Entries

1. Eliminate Dividend Income account against the Dividend

Declared by the Subsidiary.

2. Eliminate the parent’s equity in the subsidiary’s stockholders’

equity at the date of acquisition. ( 1st Elimination Entry on the
date of Acquisition)

3. Allocate excess to the specific assets and liabilities of the

subsidiary. ( 2nd Elimination Entry on the date of Acquisition)

4. Amortized the allocated excess.

Illustrative Problems
Abbreviated trial balance of Papa and Son Corporations at December 31,
2010.

Papa Son
Current Assets P 245,000 130,000
Land 300,000 50,000
Plant & Equipment (net) 1,000,000 350,000
Investment in Son 450,000
Cost of sales 1,000,000 300,000
Other Expenses 250,000 120,000
Dividends declared 100,000 50,000
3,345,000 1,000,000

Current Liabilities 295,000 100,000

Ordinary shares 1,000,000 300,000
Retained Earnings 500,000 100,000
Sales 1,500,000 500,000
Dividends income 50,000 ________
3,345,000 1,000,000
Papa Corporation acquired all the outstanding shares of Son Corp. for
P450,000 cash on January 1, 2010. Plant and equipment has remaining
10 years useful life from January 1, 2010. The elimination entries made
on separate working papers on January 1, 2010 are as follows:

E1: Ordinary Shares 300,000

Retained Earnings 100,000
Investment in Son 400,000

E2: Plant and Equipment 25,000

Goodwill 25,000
Investment in Son 50,000
1. Eliminate Dividend Income account against the Dividend Declared by
the Subsidiary.

Cost method:

Declaration/payment of Dividends; Parent Received dividends: Entry

Papa

Dividends Declared (RE) 100,000

Cash 100,000

#
Cash 50,000
Dividend Income 50,000

Son

Dividends Declared (RE) 50,000

Cash 50,000
1. Eliminate Dividend Income account against the Dividend Declared by
the Subsidiary.

Elimination Entry:

Dividends Income 50,000

Dividends Declared (RE) 50,000
2. Eliminate the parent’s equity in the subsidiary’s stockholders’ equity
at the date of acquisition.

Ordinary Shares 300,000

Retained Earnings 100,000
Investment in Son 400,000

3. Allocate excess to the specific assets and liabilities of the subsidiary.

( 2nd Elimination Entry on the date of Acquisition)

Plant and Equipment 25,000

Goodwill 25,000
Investment in Son 50,000
4. Amortized the allocated excess.

Depreciation Expense/
Operating Expense 2,500
Plant and Equipment 2,500

Excess of Plant and Equip - 25,000

Divided by 10 years - 10
Amortization 2,500
Consolidated Statements
Consolidated Net Income

Papa Son Elimination Consolidated

Sales 1,500,000 500,000 2,000,000
Dividends Income 50,000 ________ (50,000) ___________

Total Revenue 1,550,000 500,000 2,000,000

Cost of Sales 1,000,000 300,000 1,300,000

Operating Expenses 250,000 120,000 2,500 372,500

Total Cost and expenses 1,250,000 420,000 1,672,500

Consolidated Net Income 300,000 80,000 327,500

Consolidated Retained Earnings

Papa Son Elimination Consolidated

Beginning RE 500,000 100,000 (100,000) 500,000

Add: Net Income 300,000 80,000 327,500
Less:
Dividends declared:
Papa 100,000 100,000
Son ________ 50,000 (50,000) _________

Ending RE 700,000 130,000 727,500

(to be carry to
Balance Sheet)
Consolidated Statement of Financial Position

Papa Son Elimination Consolidated

Current Assets 245,000 130,000 375,000

Land 300,000 50,000 350,000
Plant and Equipment 1,000,000 350,000 22,500** 1,372,500
Goodwill 25,000 25,000
Investment in Son 450,000 (450,000) ________

Total 1,995,000 530,000 2,122,500

Current Liabilities 295,000 100,000 395,000

Ordinary Shares 1,000,000 300,000 (300,000) 1,000,000
Retained Earnings 700,000 130,000 727,500

Total 1,995,000 530,000 2,122,500

** Plant and Equipment Elimination

E3: Debit 25,000

E4: Credit 5,000

Balance 20,000