Ch 11

Intercorporate Investments and Consolidations CHAPTER 11

Learning Objectives ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Learning Objectives ,[object Object],[object Object]

Overview of Corporate Investments ,[object Object],[object Object],[object Object],[object Object],[object Object]

Overview of Corporate Investments ,[object Object],[object Object],[object Object]

Overview of Corporate Investments ,[object Object],[object Object],[object Object],[object Object]

Short-Term Investments ,[object Object],[object Object],[object Object],[object Object]

Changes in Market Prices of Securities ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Changes in Market Prices of Securities ,[object Object],[object Object],[object Object]

Changes in Market Prices of Securities ,[object Object]

Long-Term Investments in Bonds ,[object Object],[object Object],[object Object],[object Object],[object Object]

Long-Term Investments in Bonds ,[object Object],12/31/03 Investment in bonds 9,653,500 Cash 9,653,500 6/30/04 Cash 500,000 Investment in bonds 79,207 Interest revenue 579,207* 12/31/04 Cash 500,000 Investment in bonds 83,959 Interest revenue 583,959** * $9,653,500 x .06 ** ($9,653,500 - $79,207) x .06

Long-Term Investments in Bonds ,[object Object],[object Object],[object Object]

Early Extinguishment of Investment ,[object Object],12/31/04 Cash 9,600,000 Loss on disposal of bonds 216,666 Investment in bonds 9,816,666

The Market and Equity Methods ,[object Object],[object Object]

The Market and Equity Methods ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

The Market and Equity Methods ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Consolidated Financial Statements ,[object Object],[object Object],[object Object],[object Object]

The Acquisition ,[object Object],[object Object],[object Object],[object Object],[object Object],Investment in S 213 Cash 213

The Acquisition P Corporation S Corporation Cash S Shares Purchase After Purchase P Corporation S Corporation P Shareholders Consolidated corporation

The Acquisition ,[object Object]

Preparing Consolidated Statements Parent Company Records Subsidiary Records Combine Parent and Subsidiary Financial Statements on a Work Sheet Subsidiary Financial Statements Consolidated Financial Statements Parent Company Financial Statements Eliminate Double Counting Parent’s Investment Against Subsidiary OE Intercompany Receivables and Payables Intercompany Sales and Purchases

Preparing Consolidated Statements ,[object Object]

After Acquisition ,[object Object],[object Object],[object Object],[object Object],[object Object]

Minority Interests ,[object Object],[object Object],[object Object]

Minority Interests P Corporation S Corporation Cash S Shares 90% Purchase After Purchase P Corporation S Corporation P Shareholders Dashed line defines consolidated corporation P pays cash to some shareholders in S Some old S shareholders hold 10% of S Shown as “Minority Interest” in consolidated statements

Purchase Price Not Equal to Book Value ,[object Object],[object Object],[object Object],[object Object]

Accounting for Goodwill ,[object Object],[object Object],[object Object],[object Object]

Accounting for Goodwill ,[object Object],[object Object]

Goodwill and Abnormal Earnings ,[object Object],[object Object],[object Object],[object Object]

Goodwill and Abnormal Earnings ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Equity Affiliates, Minority Interest, and the Statement of Cash Flows ,[object Object],[object Object],[object Object]

Summary of Accounting for Equity Securities

Ch 11

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Ch 11