S - Entry
Debit - Retained Earnings (name)
Debit - Common Stock
Debit - Additional Paid in Capital
_Credit - Investment in Subsidiary (name)
_Credit - Non-controlling interest in subsidiary (name)
Remove Subsidiary's common stock.
Remove Subsidiary's retained earni
A - Entry
Debit - Trademarks
Debit - Patents
Debit - Goodwill
_Credit - Equipment
_Credit - Investment in Subsidiary (name)
_Credit - Non-controlling interest
Allocate the un-amortized tangible & intangible assets as of the beginning of the period with adjustments
I - Entry
Debit - Parents (name) equity income received from Subsidiary (name)
_Credit - Investment in Subsidiary (name)
Remove Subsidiary's income that was acquired by Parent along with excess amortization.
D - Entry
Debit - Investment in Subsidiary (name)
_Credit - Dividends
Remove Dividends issued by Subsidiary.
E - Entry
Debit - Amortization Expense
Debit - Equipment (net)
_Credit - Depreciation expense
_Credit - Patents, franchise, trademarks
_Credit - Customer Relationships
Reduce depreciation exp.
Increase amortization exp.
Reduce customer relationships.
Increase equip
TI - Entry (transferred inventory)
Debit - Sales/Revenue
_Credit - Cost of good sold
Removes intra-entity sales/inventory transfers by removing sales/revenue and removing COGS.
G - Entry ( inventory at end of year 1)
Debit - Cost of Goods Sold (unrealized gross profit)
_Credit - Inventory (unsold)
Removes the unrealized gross profit from ending inventory.
*
G - Entry (downstream sales)
*G is performed before any adjusted entries.
Debit - Investment in Subsidiary (name)
_Credit - Cost of Goods Sold (parents)
Parent sells inventory to subsidiary where there is a balance of unsold inventory at end of year.
*
G - Entry (upstream sales)
*G is performed before any adjusted entries.
Debit - Retained earnings - beg balance of Subsidiary (name)
_Credit - Cost of Goods Sold (unrealized gross profit)
Subsidiary sells inventory to Parent. There is a balance of unsold inventory at end of year. *G - Reduces COGS (unrealized gross profit) at
Consolidated Entries should be done in this order:
(*G), (S),(A),(I),(D),(E),(P),(TI),(G)
TL - Entry (Transfer Land)
Debit - Gain on sale of land
_Credit - Land
When land is transferred gains are not realized. Therefore, remove gains by crediting land and debiting gain on sale of land. This must be done every fiscal period.
*GL - Entry (downstream sales)
Debit - Investment in Subsidiary (name)
_Credit - Land
How to remove unrealized gains from downstream land sales. Must be done every year.
*GL - Entry (upstream sales)
Debit - Retained Earnings - seller's beginning balance
_Credit - Land
How to remove unrealized gains from upstream land sales. Must be done every year.
*GL - Entry (sold to 3rd party)
Debit - Retained earnings - seller's beginning balance
_Credit - Gain on sale of Land
When land is sold to a 3rd party gains must be realized in current period on consolidated financial statements. Only upstream land transfers that are later sold to a 3rd
TA - Entry (transfer asset)
Debit - Gain on sale of Equipment (seller's name)
Debit - Equipment
_Credit - Accumulated Depreciation
Unrealized gain must be removed and asset/equipment restated to original cost in year of transfer. Accumulated Depreciation - Gain = Equipment/Asset adj
ED - Entry (excess depreciation)
Debit - Accumulated Depreciation
_Credit - Depreciation Expense
Buyers depreciation is based on inflated transfer price. Excess depreciation expense must be removed in the year of transfer.
*TA - Entry (transfer asset after 1st year )
Debit - Retained earnings 1/1/xx (seller's name)
Debit - Equipment
_Credit - Accumulated Depreciation
Debit - Accumulated Depreciation
_Credit - Depreciation Expense
Every year these figures need to be adjusted during consolidation. Over the life of the a
*TA - Entry (downstream transfer asset after 1st year)
Debit - Investment in Subsidiary (name)
Debit - Equipment
_Credit - Accumulated Depreciation
Investment in subsidiary adjustment for downstream asset transfers. No change for ED consolidation part of this.
Compute Upstream Net Income in the year of Sale:
(Subsidiaries Net Income - Excess Amortization -Unrealized Gains + Excess Depreciation)*P % =
Compute Upstream Net Income in subsequent years:
(Subsidiaries Net Income - Excess Amortization + Excess Depreciation)*P % =
Same computation as initial year except we do not subtract unrealized gains.
Compute Downstream Net Income in the year of Sale:
(Subsidiaries Net Income - Excess Amortization)*P % - Unrealized Gain + Excess Depreciation =
Compute Downstream Net income in subsequent years:
(Subsidiaries Net Income - Excess Amortization)*P % + Excess Depreciation =
Same computation as initial year except we do not subtract unrealized gains.
Compute N.C.I.'s share of Subsidiaries Income for Downstream sales:
(Subsidiaries Net Income - Excess Amortization)*N.C.I. % =
Compute Upstream N.C.I.'s share of Subsidiaries Income in the year of sale:
(Subsidiaries Net Income - Excess Amortization - Unrealized Gain + Excess Depreciation)*N.C.I. % =
Compute Upstream N.C.I.'s share of Subsidiaries Income in the subsequent years:
(Subsidiaries Net Income - Excess Amortization + Excess Depreciation)*N.C.I. % =
Same computation as initial year except we do not subtract unrealized gains.
Compute Consolidated Sales:
P's COGS + Sub's Sales - Intra-entity transfer price =
Compute Consolidated COGS:
P's COGS + Sub's COGS - Intra-entity transfer price + unrealized gross profit in ending inventory - unrealized gross profit in beginning inventory =
How to compute Equity Income for Downstream Sales:
(Sub's Net Income - Excess Amortization)*P % - Unrealized Gross Profit in ending inventory + Unrealized Gross Profit in beginning inventory =
How to compute Equity Income for Upstream Sales:
(Sub's Net Income - Excess Amortization - Unrealized Gross Profit in ending inventory + Unrealized Gross Profit in beginning inventory)*P % =
Compute N.C.I. share of Sub's Income for Downstream sales:
(Sub's Net Income - Excess Amortization)*N.C.I. % =
Compute N.C.I. share of Sub's Income for Upstream sales:
(Sub's Net Income - Excess Amortization - Unrealized Gross Profit in ending inventory + Unrealized Gross Profit in beginning inventory)*N.C.I. % =