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CONSOLIDATED FINANCIAL
STATEMENT AT DATE OF
ACQUISITION
Sakhr Bany Khaed
1
[email protected]
Supervisor : Dr . Jamal Al Sharari
Al-albayt University - Accounting Department
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Consolidation of Wholly Owned Subsidiaries Acquired at More than
Book Value
Assume that Peerless Products acquires all of Special Foods
capital stock for $400,000 on January 1, 20X1, by issuing $100,000
of 9 percent bonds, with a fair value of $100,000, and paying cash
of $300,000.
ItemsParent company
(Peerless)
Subsidiary company (Special Foods)
Book value Fair value
Cash 50000 50000 50000
Accounts receivable 75000 50000 50000
Inventory 100000 60000 75000
Land 175000 40000 100000
Building & equipment 800000 600000
Accumulated depreciation (400000) (300000)
Net Building & equipment 400000 300000 290000
Investment in Special Foods 400000
Total assets 1200000 500000 565000
Accounts payable 100000 100000 100000
Bonds payable 300000 100000 135000
Common stock 500000 200000
Retained earnings 300000 100000
Total liabilities and owners equity 1200000 500000 235000
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Items Parent
company (Peerless)
Subsidiary company
(Special Foods)
Elimination Entries
ConsolidatedDR CR
Cash 50000 50000 - - 100000
Accounts receivable 75000 50000 - - 125000
Inventory 100000 60000 15000 - 175000
Land 175000 40000 60000 - 275000
Building & equipment 400000 300000 10000 690000
Investment in Special Foods 400000 - - 400000 0
Goodwill - - 70000 - 70000
Total assets 1200000 500000 1435000
Accounts payable 100000 100000 - - 200000
Bonds payable 300000 100000 - 35000 435000
Common stock 500000 200000 200000 - 500000
Retained earnings 300000 100000 100000 - 300000
Total liabilities and owners equity
1200000 500000 445000 445000 1435000
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Goodwill
Conceptually, goodwill as it relates to business combinations
consists of all those intangible factors that allow a business to
earn above-average profits. From an accounting perspective, the
FASB has stated that goodwill is an asset representing the future
economic benefits arising from other assets acquired in a business
combination that are not individually identified and separately
recognized )ASC 805-10-65-1). An asset is considered to be
identifiable, and therefore must be separately recognized, if it is
separable (can be separated from the business) or arises from a
contractual or other right
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Krafts $19.4 billion acquisition of Cadbury mentioned at the
beginning of the chapter resulted in Kraft recording $9.53 billion
in goodwill.
