Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881



Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem

Assume a parent has total assets of $6,000,000 and a subsidiary has total assets of $4,000,000. If the parent owns 70% of the subsidiary’s common stock, what amount of total assets will be reported on the consolidated balance sheet?

a. $10,000,000

b. $7,000,000

c. $6,000,000

d. $0, consolidation is not necessary

To determine

The amount of total assets that will be presented in the consolidated Balance sheet is to be determined.


consolidated balance sheet  is defined as the one which presents the assets and liabilities of a parent company and all its subsidiaries on a single document, with no distinctions with regards to which items belong to which companies.

Investment account in the books of parent company is adjusted towards (1) the equity (70%) acquired of the subsidiary company (2) The excess of fair value over book value of the assets acquired (i.e. 70%) to the subsidiary company. Hence, entire investment account and Total assets of the acquiring company will remain intact i.e. $6,000,000


can be defined as subsidiary company or a daughter company...

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