Consolidation Working Paper, Simple Example

Below are the condensed balance sheets of Princecraft and Sylvan Companies just prior to Princecrafts acquisition of all of the voting shares of Sylvan for $40 million in cash. The book values of Sylvan Companys net assets approximate fair value.

Balance Sheets	Princecraft Company	Sylvan Company
Cash	$ 60,000,000	$ 2,000,000
Other current assets	20,000,000	8,000,000
Property and equipment, net	70,000,000	15,000,000
Total assets	$150,000,000	$25,000,000
Total liabilities	$ 30,000,000	$ 8,000,000
Common stock	15,000,000	5,000,000
Additional paid-in capital	45,000,000	10,000,000
Retained earnings	60,000,000	2,000,000
Total liabilities and equity	$150,000,000	$25,000,000

Required

a. Prepare the journal entry Princecraft makes to record the acquisition on its own books.

Enter answers in millions (Example: $40,000,000 equals $40 million).

Description		Debit	Credit
Investment in Sylvan
Cash

b. Prepare the consolidation working paper at the date of acquisition.

• Enter answers in millions (Example: $40,000,000 equals $40 million).
• Use negative signs with your Credit (Cr) answers in the Dr(Cr) columns (not in the Eliminations Credit column).

Consolidation Working Paper
		Accounts Taken From Books			Eliminations
(in millions)		Princecraft Dr(Cr)	Sylvan Dr(Cr)		Debit	Credit		Consolidated Balances Dr(Cr)
Cash			$2
Other current assets			8
Property and equipment, net			15
Investment in Sylvan							(E)
							(R)
Goodwill				(R)
Liabilities			(8)
Common stock			(5)	(E)
Additional paid-in capital			(10)	(E)
Retained earnings			(2)	(E)
Total

c. Prepare the consolidated balance sheet at the date of acquisition, in good form.

Enter answers in millions (Example, $22,000,000 equals $22 million).

Princecraft Company and Subsidiary Consolidated Balance Sheet Date of Acquisition
(in millions)
Assets	...........			Liabilities
Cash				Total liabilities
Other current assets
Property and equipment, net				Shareholders equity
Goodwill				Common stock
				Additional paid-in capital
				Retained earnings
				Total equity
Total assets				Total liabilities and equity