10-1

Baker / Lembke / King

Additional
Consolidation
Reporting 10
Issues Electronic Presentation by
Douglas Cloud
Pepperdine University

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 10-2
Consolidated Statement of Cash Flows
• Prepared after Consolidated I/S, R/E and B/S.
• Steps:
– Adjustment of consolidated NI (depreciation and
amortization resulting from write-off of
differentials)
– Eliminating transfers between affiliates: sale or
purchase of assets, unrealized profit of
intercompany sales
– Non-controlling interest: income is deducted;
receipts and payments

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 10-3
Consolidated Income Statement, 20X2
PT Induk and Subsidiary
Consolidated Income Statement
For the Year Ended December 31, 20X2
Sales
Rp720,000,000
Gain on Sale of Land
30,000,000

Rp750,000,000
Less: Cost of Goods Sold Rp340,000,000
Depreciation Expense 76,800,000
Other Expenses 105,000,000
-521800,000
Income Available to All Shareholders
Rp228,200,000
Income to Noncontrolling Interest
-15,000,000
Consolidated
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 10-4
Consolidated Cash Flows Statement, 20X2
PT Induk and Subsidiary
Consolidated Statement of Cash Flows
For the Year Ended December 31, 20X2
Cash Flows from Operating Activities:
Consolidated Net Income Rp213,200,000 Top
Noncash Expenses, Revenues, Losses, portion
and Gains included in Income:
Depreciation Expense 76,800,000
Income to Noncontrolling
Interest 15,000,000
Gain on Sale of Land -30,000,000
Increase in Accounts Receivable -105,000,000
Increase in Inventory -95,000,000
Increase in Accounts Payable 30,000,000
Net Cash Provided by Operating
Activities
Rpl05,000,000
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 10-5
Consolidated Cash Flows Statement, 20X2
PT Induk and Subsidiary
Consolidated Statement of Cash Flows
For the Year Ended December 31, 20X2

Cash Flows from Investing Activities:

Acquisition of Equipment -Rp100,000,000
Sale of Land 70,000,000
Net Cash Used in Investing Activities
-Rp 30,000,000
Cash Flows from Financing Activities:
Dividends Paid:
To Parent Company Shareholders -Rp 60,000,000
To Noncontrolling Shareholders -8,000,000
Net Cash Used in Financing Activities
-68,000,000
Net Increase
Bottominportion
Cash
Rp 7,000,000
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 10-6
Consolidation Following an Interim Purchase
The results of operations for a subsidiary purchased
during the fiscal period are included in the consolidated
income statement in one of two ways:
 Include in the consolidated income statement the
revenue and expenses of the subsidiary as if it had
been acquired at the beginning of the fiscal period,
and deduct the parent’s share of the subsidiary’s
preacquisition earnings at the bottom of the
consolidated income statement.
 Include in the consolidated income statement only
the subsidiary’s revenue earned and expenses
incurred subsequent to the date of combination.
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 10-7
Consolidation Following an Interim Acquisition

On July 1, 20X1, PT Induk purchases 80 percent of

the common stock of PT Anak for its underlying
book value of Rp246,400,000.

Book value of PT Anak on January 1, 20X1:

Common stock Rp200,000,000
Retained earnings 100,000,000
Rp300,000,000
Net income, January 1 to June 30, 20X1 20,000,000
Dividends, January 1 to June 30, 20X1 -12,000,000
Book value of PT Anak on July 1, 20X1 Rp308,000,000
PT Induk’s ownership interest x .80
Book value on July 1, 20X1, of shares acquired Rp246,400 ,000

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 10-8
Consolidation Following an Interim Purchase

The ownership situation on July 1, 20X1, is as follows:

P Cost of investment Rp246,400,000

Book value (7/1/X1)
Common stock--
7/1/X1 PT Anak Rp200,000,000
80% Retained earnings--
PT Anak 108,000,000
Rp308,000,000
PT Induk’s share x .80 -246,400,000
S NCI Differential Rp -0-
20%

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 10-9
Parent Company Entries
On July 1, 20X1, PT Induk records the
purchase of PT Anak’ stock.
July 1, 20X1
(1) Investment in PT Anak Stock 246,400,000
Cash
246,400,000
Record purchase of PT Anak
stock.
During the second half of 20X1, PT Induk
records its share of PT Anak’ income.
Rp30,000,000
(3) Investment in PT Anak Stock 24,000,000
x. 80
Income from Subsidiary 24,000,000
Record equity-method income.

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 10-10
Parent Company Entries

PT Induk records dividends received from PT

Anak during the second half of 20X1.

(2) Cash 14,400,000

Investment in PT Anak Stock 14,400,000
Record dividends from PT Anak.
Rp18,000,000
x .80

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 10-11
Consolidation Following an Interim Purchase

20X1 PT Induk PT Anak Eliminations

Item Debits Credits Consolidated
Income from
Subsidiary 24,000

Dividends
Declared (60,000
) (30,000)

Investment in
PT Anak
Stock 256,000

An entry is needed to eliminate

income from the subsidiary.
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 10-12
Consolidation Following an Interim Purchase

20X1 PT Induk PT Anak Eliminations

Item Debits Credits Consolidated
Income from
Subsidiary 24,000 (4) 24,000

Dividends
Declared (60,000
) (30,000) (4) 14,400

Investment in
PT Anak
Stock 256,000 (4) 9,600

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 10-13
Consolidation Following an Interim Purchase

20X1 PT Induk PT Anak Eliminations

Item Debits Credits Consolidated
Income to
Noncontrolling
Interest

Dividends
Declared (60,000) (30,000) (4) 14,400

Noncontrolling
Interest

An entry is required to assign income

to noncontrolling interest.
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 10-14
Consolidation Following an Interim Purchase

20X1 PT Induk PT Anak Eliminations

Item Debits Credits Consolidated
Income to
Noncontrolling
Interest (5) 10,000 (10,000)

Dividends
Declared (60,000) (30,000) (4) 14,400
(5) 6,000

Noncontrolling
Interest (5) 4,000

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 10-15
Consolidation Following an Interim Purchase

20X1 PT Induk PT Anak Eliminations

Item Debits Credits Consolidated
Preacquisition
Subsidiary Inc.
Retained
Earnings, Jan. 1 300,000 100,000
Dividend Decl. )
(60,000 (30,000) (4) 14,400
(5) 6,000

Investment in
PT Anak 256,000 (4) 9,600

Common Stock 500,000 200,000

Noncontrolling
Interest (11) 4,000
An entry is necessary to eliminate the
beginning investment balance.
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 10-16
Consolidation Following an Interim Purchase

20X1 PT Induk PT Anak Eliminations

Item Debits Credits Consolidated
Preacquisition
Subsidiary Inc. (6) 16,000 (16,000)
Retained
Earnings, Jan. 1 300,000 100,000 (6)100,000 300,000
Dividend Decl. )
(60,000 (30,000) (4) 14,400
(5) 6,000
(6) 9,600 (60,000)
Investment in
PT Anak 256,000 (4) 9,600
(6)246,400
Common Stock 500,000 200,000 (6)200,000 500,000
Noncontrolling
Interest (5) 4,000
(6) 60,000 64,000

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 10-17
Consolidated Income Statement, 20X1
PT Induk and Subsidiary
Consolidated Income Statement
For the Year Ended December 31, 20X1
Sales
Rp600,000,000
Cost of Goods Sold
-285,000,000
Gross Margin
Rp315,000,000
Expenses:
Depreciation and Amortization Rp70,000,000
Other Expenses 55,000,000
Total Expenses
-125,000,000

Rp190,000,000
Preacquisition Subsidiary Income
-16,000,000
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 10-18
Consolidated Earnings per Share

Income
available
Consol- Adjust- Percent to Subsi-
idated + ment for Shares
owner- common diary
net - parent - ship held
x
share-
+ held by x
diluted
income parent
securities by parent holders of EPS
Diluted subsidi-
consoli- ary
dated =
Weighted average of Shares of parent to be
EPS
parent company shares + issued if dilutive
outstanding securities are converted
and options exercised

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 10-19
Consolidated Net Income

PT Induk’s separate operating income Rp140,000,000

PT Anak’ income before taxes 50,000,000
Total entity income before taxes Rp190,000,000
Consolidated income taxes (40%) -76,000,000
Total entity income after taxes Rp114,000,000
Less: Income to noncontrolling shareholders
(Rp30,000,000 x .20) -6,000,000
Consolidated net income Rp108,000,000

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 10-20
PT Anak Food’s Earnings Per Share
Basic Diluted
PT Anak’ net income Rp30,000,000 Rp30,000,000
Interest effect of assumed conversion of
bonds, net of taxes
(Rp100,000,000 x .06) x (1 - .40) 3,600,000
Income accruing to common stock Rp30,000,000 Rp33,600,000
Weighted-average common shares
outstanding in 20X1 20,000,000 20,000,000
Additional shares from assumed bond
conversion 4,000,000
Weighted-average shares and share
equivalents 20,000,000 24,000,000

EPS Rp1,500 Rp1,400

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 10-21
Chapter Ten

The
End
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