Chapter 4: Consolidated Financial Statement After Acquisition

The cost method and various forms of the equity method are methods to record investments after acquisition. All acquisitions reflect cost at the date of acquisition.

Instructions:

Please elaborate the understanding of each method of,

a. Cost method

b. Partial equity method

c. Complete equity method

Including characteristics (and its difference) in each method related to,

- Journal entries on the parents books to account for an investment

- Journal entries on the parents books to account for dividend or equity income

- Workpaper preparation for consolidation financial statement (includes recording NCI)

- Eliminating entries for the year of acquisition (includes intercompany revenue and expense items)

- Interim acquisition of subsidiary