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):


Company P acquired a 100% voting interest in Company S


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:

Company P acquired a 100% voting interest in Company S


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?

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...

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