Consolidated Financial Statement[APB 51]

• Business Combinations
  Step[B/C]
  1. Merger or Acquisition
  2. Purchase or Pooling
  3. when Purchase:
     • Cash or Stock
  Step[Consolidation]
  1. when Date of Acquisition:
     • Purchase or Pooling
     • when Purchase:Cash or Stock
     • what part of procedure
     • Elimination entries
  2. Subsequent to Acquisition:
     • Purchase or Pooling
     • when Purchase:Cash or Stock
     • what part of procedure
     • Elimination entries
• Pooling Method[APB 16]
  1. Two-Year Rule(Autonomous)
  2. 10 Percent Rule(Independent)
  1. Single Transaction(One-Year to Complete)
  2. Exchange of Coomon Stock(90 % Test)
  3. No equity changes in contemplation(2 Year Rule)
  4. No shares reacquired for purpose of combination
  5. No change in proportionate equity interest
  6. Voting rights immediately exercisable
  7. Combination resolved at consummation
  1. Reacquiring or Retiring Stock
  2. Former Shareholder
  3. Disposal of Assets
• Purchasing Method
  1. Merger:

     [Dr]	Assets(FMV)	##,###
     	[Cr]	Liabilities(FMV)	##,###
     	[Cr]	Cash	##,###

  2. Acquisition:

     [Dr]	Investment in B	##,###
     	[Cr]	Cash	##,###

     
     

     [Dr]	Investment in B	##,###
     	[Cr]	Common Stock(FMV)	##,###
     	[Cr]	APIC(FMV)	##,###

• Intercompany Transactions
  Intercompany Inventory transaction
  

  P
  1.	[Dr]	Purchase	$1,000
  		[Cr]	Cash	$1,000
  2.	[Dr]	Cash	$1,250
  		[Cr]	Sales	$1,250
  3.	[Dr]	CGS	$1,000
  		[Cr]	Purchase	$1,000
  S
  2.	[Dr]	Purchase	$1,250
  		[Cr]	Cash	$1,250
  3.	[Dr]	CGS	$1,250
  		[Cr]	Purchase	$1,250
  4.	[Dr]	Inventories	$500
  		[Cr]	CGS	$500
  Elimination[1st Year]
  a.	[Dr]	CGS	$100
  		[Cr]	Inventories	$100
  b.	[Dr]	Sales	$1,250
  		[Cr]	CGS	$1,250
  Elimination[2nd Year]
  a.	[Dr]	RE	$100
  		[Cr]	CGS	$100

  
  
  Reason of a.
  1. [P+S] EI: $400
  2. [S] EI: $500
  3. EI: $100[S] > [S+P]
  4. CGS:$100[S] < [S+P]
  5. NI:$100[S] > [S+P]
  6. RE(1st Year):$100[S] > [S+P]
  7. RE(2nd Year):$100[S] > [S+P]

  	P	S	[Dr]	[Cr]	MI	C/B
  Sales	$1,250	$1,050	$1,250			$1,050
  CGS	$1,000	$750	$100	$1,250		$600
  Gross Margin	$250	$300				$450
  Inventories	$0	$500		$100		$400

  
  

  	Parent's Sales Price	Cost	P's Gross Profit
  BI	(1)##,###	(2)##,###	(3)##,### (1)-(2)	Realized
  Sales	(4)##,###	(5)##,###	(6)##,###
  Total	(7)##,###	(8)##,###	(9)##,###
  EI	((10)##,###)	((11)##,###)	((12)##,###)	Unrealized
  CGS	(13)##,###	(14)##,###	(15)##,###

  
  

  [Dr]	R/E	(3)##,###
  	[Cr]	CGS	(3)##,###
  [Dr]	Sales	(4)##,###
  	[Cr]	Purchases	(4)##,###
  [Dr]	CGS	(12)##,###
  	[Cr]	Inventory	(12)##,###

  
  Intercompany Fixed Assets transaction
  

  P
  [Dr]	Cash	$540
  [Dr]	A/D	$200
  	[Cr]	Equipment	$500
  	[Cr]	Gain	$240
  S
  [Dr]	Equipment	$540
  	[Cr]	Cash	$540
  Elimination(1)
  [Dr]	Gain	$240
  	[Cr]	Equipment	$40
  	[Cr]	A/D	$200

  
  

  	P	S	[Dr]	[Cr]	MI	C/B
  A/D		($180)	$80			($100)
  Depreciation Expense		$180		$80		$100

• Combined Financial Statements

  Purchase:Consolidated F/S(Date of combination)
  1.	P,S in worksheet
  2.	Elimination entries
  [Dr]	Common Stock	##,###(S*P%)
  [Dr]	APIC	##,###(S*P%)
  [Dr]	RE	##,###(S*P%)
  [Dr]	Difference	##,###
  	[Cr]	Investment in S	##,###
  3.
  [Dr]	Common Stock	##,###(S*(1-P)%)
  [Dr]	APIC	##,###(S*(1-P)%)
  [Dr]	RE	##,###(S*(1-P)%)
  	[Cr]	Minority Interest	##,###
  4.	when FV > BV
  [Dr]	Equipment	##,###((FV-BV)*P%)
  	[Cr]	Differential	##,###
  5.
  [Dr]	Goodwill	##,###
  	[Cr]	Differential	##,###

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