MATERI PRAKTIKUM AKUNTANSI KEUANGAN LANJUTAN FATA 2018

MATERI LAB 5
CONSOLIDATED TECHNIQUES AND PROCEDURES

❖ Sequence for Making Workpaper Entries

In making a consolidated workpaper, the sequence of workpaper adjustments and
eliminations include the following:
1. Adjustments for errors and omissions in the separate parent and subsidiary
statements.
2. Adjustments to eliminate intercompany profits and losses.
3. Adjustment to eliminate income and dividends from subsidiary and adjust the
investment in subsidiary to its beginning-of-the-period balance.
4. Adjustment to record the noncontrolling interest in subsidiary’s earnings and
dividends.
5. Eliminate reciprocal investment in subsidiary and subsidiary equity balances.
6. Record and amortize fair-value differentials (from step 5).
7. Eliminate other reciprocal balances (intercompany receivables and payables,
revenues and expenses, and so on).

❖ Example
DTWM acquired 80% interest in Danendra Corp.’s outstanding shares on January 1, 2021
for $1,800,000 cash. Book value of Danendra Corp.’s equity consisted of $800,000
common stock, $600,000 additional paid-in capital, and $400,000 retained earnings.
Danendra's assets that show differences between fair value and book value are presented
below.
Explanation Amount
Inventory Overvalued $75,000 Sold on 2021
Building Undervalued $100,000 10 years (remaining useful life)
Patent Unrecorded $240,000 20 years (remaining useful life)

The remaining excess of fair value over book value is allocated to goodwill. On December
31, 2021, Danendra’s account payable includes $30,000 owed to DTWM. This account
payable is due on January 10, 2022 and all dividends on DTWM comes from Danendra.
DTWM and Danendra’s financial statements for the year 2021 consist of:

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MATERI PRAKTIKUM AKUNTANSI KEUANGAN LANJUTAN FATA 2018
DTWM DANENDRA
Income & Retained Earnings Statement
Sales $2,450,000 $1,470,000
Income from Danendra $322,400 -
COGS ($1,150,000) ($730,000)
Depreciation Expense ($630,000) ($210,000)
Other Expense ($235,000) ($180,000)
Net Income $757,400 $350,000
Retained Earnings, Jan 1 $300,000 $400,000
Dividends ($180,000) ($140,000)
Retained Earnings, Dec 31 $877,400 $610,000

Balance Sheet

ASSETS
Cash $780,000 $210,000
Accounts Receivable-net $200,000 $290,000
Dividends Receivable $20,000 -
Inventory $220,000 $150,000
Other Current Assets $310,000 $230,000
Land $584,000 $460,000
Building-net $580,000 $380,000
Equipment-net $563,000 $490,000
Investment in Danendra $2,010,400 -
Total Assets $5,267,400 $2,210,000

LIABILITIES & EQUITY

Accounts Payable $350,000 $80,000
Dividends Payable $150,000 $50,000
Other Liabilities $540,000 $70,000
Common Stock $1,700,000 $800,000
Additional Paid-in Capital $1,650,000 $600,000

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MATERI PRAKTIKUM AKUNTANSI KEUANGAN LANJUTAN FATA 2018
Retained Earnings $877,400 $610,000
Total Liabilities & Equity $5,267,400 $2,210,000
Instruction : Prepare the consolidated workpaper for DTWM and Subsidiaries on
December 31, 2021!

# Calculation of Total Excess FV over BV

FV of 80% interest acquired $1,800,000
Implied fair value ($1,800,000/80%) $2,250,000
BV of Danendra at acquisition ($800,000+$600,000+$400,000) $1,800,000
Excess FV over BV $450,000

# Allocation to Net Identifiable Assets

Allocation Amount
Inventory Overvalued ($75,000)
Building Undervalued $100,000
Patent Unrecorded $240,000
Allocation to Net Identifiable Assets $265,000
Goodwill $185,000
Excess FV over BV $450,000

# Calculation of Income from Danendra

Danendra's Net Income $350,000
Add: Overvalued Inventory Sold on 2021 $75,000
Less: Depreciation of Undervalue Building ($100,000/10 yrs) ($10,000)
Amortization of Unrecorded Patent ($240,000/20 yrs) ($12,000)
Danendra's Adjusted Income $403,000
DTWM 80% Controlling Interest Share ($403,000*80%) $322,400
NCI 20% Share ($403,000*20%) $80,600

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MATERI PRAKTIKUM AKUNTANSI KEUANGAN LANJUTAN FATA 2018
# Investment Calculation, Dec 31, 2021
• Option 1
Initial Investment (100%) $2,250,000
Add: Danendra's Adjusted Income $403,000
Less: Danendra's Dividends ($140,000)
FV of Danendra at Dec 31 $2,513,000
Investment in Danendra (80%) ($2,513,000*80%) $2,010,400
NCI (20%) ($2,513,000*20%) $502,600
_or_

• Option 2
Underlying BV of Danendra at 31 Dec, 2021 ($800,000 + $2,010,000
$600,000 + $610,000)
Add: Unamortized Building ($100,000-$10,000) $90,000
Unamortized Patent ($240,000-$12,000) $228,000
Goodwill $185,000
FV of Danendra, Dec 31 $2,513,000
Investment in Danendra (80%) ($2,513,000*80%) $2,010,400
NCI (20%) ($2,513,000*20%) $502,600

# Working Paper Entries

a. To Eliminate Income and Dividends from Danendra and Return Investment

Account to its Beginning-of-Period Balance
Income from Danendra $322,400
Dividends (80%) $112,000
Investment in Danendra $210,400

b. To Enter NCI, NCI Share of Subsidiary Income, and Dividends

NCI Shares $80,600
Dividends (20%) $28,000
NCI $52,600

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MATERI PRAKTIKUM AKUNTANSI KEUANGAN LANJUTAN FATA 2018
c. To Eliminate Reciprocal Investment and Equity Amounts, Establish Beginning
Non-Controlling Interest, and Enter Unamoritzed Excess
Common Stock $800,000
Additional Paid-in Capital $600,000
Retained Earnings, Jan 1 $400,000
Unamortized Excess $450,000
Investment in Danendra (80%) $1,800,000
NCI (20%) $450,000

d. To Eliminate Unamortized Excess

Building $100,000
Patent $240,000
Goodwill $185,000
Inventory $75,000
Unamortized Excess $450,000

e. To Eliminate Excess of COGS on the Overvalued Inventory

Inventory $75,000
COGS $75,000

f. To Account for Additional Depreciation on the Undervalued Building

Depreciation Expense $10,000
Building $10,000

g. To Recognize Amortization on Previously Unrecorded Patent

Other Expense $12,000
Patent $12,000

h. To Eliminate Reciprocal Accounts Payable & Accounts Receivable

Accounts Payable $30,000
Accounts Receivable $30,000

i. To Eliminate Dividends Payable & Dividend Receivable

Dividends Payable $20,000
Dividends Receivable $20,000

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 MATERI PRAKTIKUM AKUNTANSI KEUANGAN LANJUTAN FATA 2018
# Consolidated Statement
DTWM CORPORATION & SUBSIDIARY
CONSOLIDATED WORKPAPER
December 31, 2021
Adjustment & Elimination Consolidated
DTWM Danendra
Dr. Cr. Statement
Income Statement
Sales $2,450,000 $1,470,000 $3,920,000
Income from Danendra $322,400 - a. $322,400 -
COGS ($1,150,000) ($730,000) e. $75,000 ($1,805,000)
Depreciation Expense ($630,000) ($210,000) f. $10,000 ($850,000)
Other Expense ($235,000) ($180,000) g. $12,000 ($427,000)
Consolidated Net Income $838,000
NCI Share b. $80,600 ($80,600)
Controlling Share of Net
$757,400 $350,000 $757,400
Income

Retained Earnings
Statement
Retained Earnings DTWM $300,000 $300,000
Retained Earnings Danendra $400,000 c. $400,000 -
Net Income $757,400 $350,000 $757,400
($180,000) ($140,000) a. $112,000
Dividends ($180,000)
b. $28,000
Retained Earnings, Dec 31 $877,400 $610,000 $877,400

Balance Sheet

ASSETS
Cash $780,000 $210,000 $990,000
Accounts Receivable-net $200,000 $290,000 h. $30,000 $460,000
Dividends Receivable $20,000 - i. $20,000 -
Inventory $220,000 $150,000 e. $75,000 d. $75,000 $370,000

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 MATERI PRAKTIKUM AKUNTANSI KEUANGAN LANJUTAN FATA 2018
Other Current Assets $310,000 $230,000 $540,000
Land $584,000 $460,000 $1,044,000
Building-net $580,000 $380,000 d. $100,000 f. $10,000 $1,050,000
Equipment-net $563,000 $490,000 $1,053,000
a. $210,400
Investment in Danendra $2,010,400 - -
c. $1,800,000
Patent d. $240,000 g. $12,000 $228,000
Goodwill d. $185,000 $185,000
Unamortized Excess c. $450,000 d. $450,000 -
Total Assets $5,267,400 $2,210,000 $5,920,000

LIABILITIES & EQUITY

Accounts Payable $350,000 $80,000 h. $30,000 $400,000
Dividends Payable $150,000 $50,000 i. $20,000 $180,000
Other Liabilities $540,000 $70,000 $610,000
Common Stock $1,700,000 $800,000 c. $800,000 $1,700,000
Additional Paid-in Capital $1,650,000 $600,000 c. $600,000 $1,650,000
Retained Earnings $877,400 $610,000 $877,400
NCI, Jan 1 c. $450,000 $450,000
NCI, Dec 31 b. $52,600 $52,600
Total Liabilities & Equity $5,267,400 $2,210,000 $5,920,000

DANENDRA – MARGARETA – TITAN – WINONA FATA 2018