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‘Consolidated Financial Statement has some advantages but at the same time it is not free from limitations.’ Elaborate this statement.

Advanced Financial Accounting

  • Assume Large Corporation Invested $ 600,000 for Small Corporation and the estimated Fair Market Values of Assets, Liabilities and Equity Accounts are as follows:
Assets Amount $ Liabilities Amount $
Account Receivable

Inventory

LT Marketable Securities

PP & E

125,000

50,000

55,000

170,000

400,000

 

Account Payables

Retained Earnings

Commons Stock

180,000

120,000

100,000

 

400,000

 

 

Required:  (2+3 Marks)

  1. Determine the Amount of Goodwill or Bargain Purchase.
  2. What is the Journal Entry in the book of Large Corporation?

 

  • From the following Table pass Basic Elimination Entry under Equity Method in the book of Parent Company:        (5 Marks)
  Total

Book Value

= Common

Stock

+ Additional

Paid in Capital

+ Retained

Earnings

Beginning Book Value

+ Net Income

–     Dividend

600

 

200

(50)

150 550 (100)

 

200

(50)

Ending

Book Value

750 150 550 50

 

  • Consolidated financial statements present the financial position and results of operations for controlling entity and one or more controlled entities. ‘Consolidated Financial Statement has some advantages but at the same time it is not free from limitations.’ Elaborate this statement. (5 Marks)

 

 

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