You will submit a report as well as the necessary spreadsheets for Section III of the final project.You will discuss acquisitions and the consolidation process. You will also create a hypothetical example of a consolidation worksheet to submit with your report.
Specifically, the following critical elements must be addressed:
III. Acquisitions: The company is also considering acquiring another small company. Communicate the crucial elements of creating consolidated financial statements including the income statement, balance sheet, and statement of cash flows in the case of possibly acquiring another company.
A. If the company acquires another small company, assess how it would know if it has to consolidate its financial statements on an annual basis. Defend your response.
B. Describe what the consolidation process entails.
C. Compose a hypothetical example of the consolidation worksheet and elimination entries. Ensure all information is entered accurately.
Guidelines for Submission: Your report must be submitted as a 2- to 3-page Microsoft Word document with double spacing, 12-point Times New Roman font, one-inch margins, and at least two sources cited in APA format. Your accompanying spreadsheets must be submitted as Microsoft Excel files.
Answer preview
When an individual parent company acquires another company reporting the financial statements to the public becomes a conflicting issue. This is so because the shareholders may need an account of the investment of the subsidiary company to reflect the control by the parent company. This is such that a parent company has control over its subsidiary company will prepare one financial statement treating the entries as from an individual entity. The study shows that consolidation is permissible when the parent company has 50% share control of the subsidiary company.
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