Question: Company P acquired a 100 voting interest in Company S

Company P acquired a 100% voting interest in Company S for $120 million cash at the start of the year. Immediately before the business combination, each company had the following condensed balance sheet accounts ($ in millions):

1. Prepare a tabulation of the consolidated balance sheet accounts immediately after acquisition. Use the balance sheet equation format.
2. Suppose P and S have the following results for the year:

Prepare income statements for the year for P, S, and the consolidated entity. Assume neither P nor S sold items to the other.
3. Present the effects of the operations for the year on P’s accounts and on S’s accounts, using the balance sheet equation. Also tabulate the consolidated balance sheet accounts at the end of the year. Assume that liabilities are unchanged.
4. Suppose S paid a cash dividend of $6 million. What accounts in requirement 3 would be affected and by howmuch?

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  • CreatedFebruary 20, 2015
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