Journal entries

Date Description Debit Credit

01/01/202
1 Investment in XYZ Company 500,000

Cash 500,000
#To record the investment of ABC Company in XYZ Company
12/31/202
1 Cash 37,500

Dividend Income 37,500

#To record the dividend income from XYZ Company

Consideration given by ABC Company 500,000

Non-controlling interest -
Previously held equity interest in the acquiree -
Total 500,000
Less: Book value of XYZ Company's net assets
Ordinary Share Capital 300,000
Share Premium 50,000
Retained Earnings 50,000 400,000
Excess/Difference 100,000
Changes in fair value
Increase in Inventory - 40,000
Decrease in Equipment 80,000
Increase in Bonds Payable 27,500 67,500
Goodwill/(Gain on Acquisition) 167,500
 Amortization
Year 1 Year 2 Year 3 …
Inventory - 40,000 - - -
Equipment (80k / 8 years) 10,000 10,000 10,000 10,000
Bonds Payable (27,500 / 5 years) 5,500 5,500 5,500 5,500
Total Amortization - 24,500 15,500 15,500 15,500
 Working Paper
Elimination Entries
Date Description Debit Credit
Ordinary Share Capital 300,000
Share premium 50,000
Retained Earnings 50,000
Investment in XYZ Company 400,000

Inventory 40,000
Investment in XYZ Company 67,500
Accumulated Depreciation 80,000
Premium on Bonds Payable 27,500

Goodwill 167,500
Investment in XYZ Company (500k - 400k + 67,500) 167,500

Dividend Income 37,500

Dividend declared and paid 37,500

Cost of Sales 40,000

Inventory 40,000

Accumulated Depreciation 10,000

Depreciation Expense 10,000

Premium on Bonds Payable 5,500

Interest Expense 5,500

Impairment loss 17,500

Goodwill 17,500
Working Paper
 ABC Company XYZ Company
Elimination Entries Consolidated

Cash 1,000,000 200,000 - 1,200,000

Accounts Receivable 300,000 200,000 - 500,000

Inventory 900,000 500,000 - 1,400,000

Investment in XYZ Company 500,000 - - 500,000 -

Equipment 2,750,000 500,000 - 3,250,000

Accumulated Depreciation 687,500 150,000 70,000 907,500

Goodwill - - 150,000 150,000

Accounts Payable 371,875 187,500 - 559,375

Bonds Payable (including premium on bonds) 600,000 550,000 22,000 1,172,000

Ordinary Share Capital 1,600,000 300,000 - 300,000 1,600,000

Share Premium 400,000 50,000 - 50,000 400,000

Retained Earnings Not Applicable

Sales 10,000,000 2,000,000 - 12,000,000

Cost of Sales 6,500,000 1,300,000 40,000 7,840,000

Operarting Expense 2,750,000 550,000 2,000 3,302,000

Dividend Income 37,500 - - 37,500 -

ABC Company
 Consolidated Statement of Financial Position

December 31, 2021

Cash 1,200,000

Accounts Receivable 500,000

Inventory 1,400,000

Equipment 3,250,000

Less: Accumulated Depreciation 907,500 2,342,500 (3,250,000 - 907,500)

Goodwill 150,000

Total Assets 5,592,500 -

Accounts Payable 559,375

Bonds Payable 1,172,000

Ordinary Share Capital 1,600,000

Share Premium 400,000

Retained Earnings 1,861,125

Total Liabilities and Equity 5,592,500

ABC Company
Statement of Consolidated Retained Earnings
December 31, 2021
Beginning Retained Earnings 1,200,000
Add: Consolidated Net Income attributable to parent 858,000
Less: Dividends 196,875
Ending Retained Earnings 1,861,125
ABC Company
Consolidated Income Statement
December 31, 2021
Sales 12,000,000
Less: Cost of Sales 7,840,000
Gross profit 4,160,000
Less: Operating Expense 3,302,000
Consolidated Net Income attributable to parent 858,000