Homework: Consolidated Financial Statements Scenario
The first part is a scenario covering the topic of consolidated financial statements. The second part is the preparation of a consolidated financial statement. You will submit both parts separately.
Part I: Scenario - Written
A new employee has been given responsibility for preparing the consolidated financial statements of Sample Company. After attempting to work alone for some time, the employee seeks assistance in gaining a better overall understanding of the way in which the consolidation process works. You have been asked to provide assistance in explaining the consolidation process. The employee is asking you to respond to the following questions. Provide full explanations and use examples to support your work.
o Why must the eliminating entries be entered in the consolidation worksheet each time consolidated statements are prepared?
o How is the beginning-of-period noncontrolling interest balance determined?
o How is the end-of-period noncontrolling interest balance determined? Provide an example.
o Which of the subsidiary's account balances must always be eliminated? Why?
o Which of the parent company's account balances must always be eliminated? Why?
Part II: Problem Solving Journal
Using the data in the Option 1 Spreadsheet (linked at the bottom of the page), perform the accounting required for the acquisition of Little, Inc. by Big, Inc. Within the worksheet, you are to:
o Select an accounting method (either cost or equity) and explain why you selected this method
o Perform the required journal entries
o Complete the consolidation worksheet
o Prepare the consolidated balance sheet in good form
Format your homework according to the following formatting requirements:
o The answer should be typed, using Times New Roman font (size 12), double spaced, with one-inch margins on all sides.
o The response also includes a cover page containing the title of the homework, the student's name, the course title, and the date. The cover page is not included in the required page length.
o Also include a reference page. The Citations and references must follow APA format. The reference page is not included in the required page length.