Depreciation Worksheet for Electronics - PDF by yhw20079

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									              The Trial
Appendix 2A    Balance
              Worksheet
              Technique




                          1
2                     APPENDIX 2A          THE TRIAL BALANCE WORKSHEET TECHNIQUE




                     I  n practice, one occasionally encounters a consolidation worksheet technique different from the
                        three-statement approach shown earlier. This technique (1) begins with the separate trial bal-
                      ances of each company and then (2) proceeds in a horizontal fashion to prepare the three consol-
                      idated financial statements. The major disadvantage to this approach is that one does not see the
                      separate statements of each company.
                          Inquiries to many international companies in the electronics industry have led us to conclude
                      that very few companies use this approach, which is an old-fashioned technique. The reason for its
                      negligible use is that virtually all parent companies require their subsidiaries to submit financial
                      statements—not trial balances.1
                          For the sole purpose of acquainting you with this technique, we present it in Illustration 2A-1
                      (using the amounts shown in Illustration 2-13). The basic elimination entry used for Illustration
                      2-13 is repeated for convenience:

    WO R K S H E E T E N T R Y O N LY
           Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                5,000
           Additional Paid-in Capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                55,000
           Retained Earnings, 1/1/07 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                    20,000
           Equity in Net Income (of Subbco) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                     32,000
                    Dividends Declared . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                12,000
                    Investment in Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                 100,000




                      1
                        For many decades, the CPA examination has consistently used the financial statement technique—not the trial balance technique—
                      for consolidation problems.
I L L U S T R AT I O N 2 A- 1                        CONSOLIDATION WORKSHEET—TRIAL BALANCE TECHNIQUE

                                                                                                      Parrco and Subbco
                                                                                       Consolidation Worksheet as of December 31, 2007

                                                                                                                                                                                           CONSOLIDATED
                                                                                                                                                                                                   RETAINED    BALANCE
                                                                    PARRCO                                SUBBCO                     CONSOLIDATION ENTRIES                    INCOME STATEMENT     EARNINGS     SHEET
                                                             DR.                 CR.                DR.               CR.               DR.                        CR.         DR.        CR.      (DR.) CR.
  Cash . . . . . . . . . . . . . . . . . . . . . .          56,000                                 41,000                                                                                                        97,000
  Accounts receivable . . . . . . . . . . .                 82,000                                 45,000                                                                                                       127,000
  Inventory . . . . . . . . . . . . . . . . . .            140,000                                 82,000                                                                                                       222,000
  Investment in Subbco . . . . . . . . . .                 100,000                                                                                        1      100,000                                             –0–
  Land . . . . . . . . . . . . . . . . . . . . . .         220,000                                30,000                                                                                                        250,000
                                                                                                                                                                                                                           APPENDIX 2A




  Building and equipment . . . . . . . .                   500,000                               150,000                                                                                                        650,000
  Accumulated depreciation . . . . . . .                                       360,000                               26,000                                                                                    (386,000)
                                                                                                                                                                                                                960,000
  Payables and accruals . . . . . . . . . .                                    160,000                              90,000                                                                                     250,000
  Long-term debt . . . . . . . . . . . . . .                                   210,000                             120,000                                                                                     330,000
  Parrco:
      Common stock . . . . . . . . . . . . .                                    10,000                                                                                                                          10,000
      Add’l paid-in capital . . . . . . . .                                    190,000                                                                                                                         190,000
      Retained earnings, 1/1/07 . . . .                                        123,000                                                                                                             123,000
      Dividends declared . . . . . . . . . .                 85,000                                                                                                                                (85,000)
  Subbco:
      Common stock . . . . . . . . . . . . .                                                                          5,000            5,000        1                                                   –0–
      Add’l paid-in capital . . . . . . . .                                                                          55,000           55,000        1                                                   –0–
      Retained earnings, 1/1/07 . . . .                                                                              20,000           20,000        1                                                   –0–
      Dividends declared . . . . . . . . . .                                                       12,000                                                 1        12,000                               –0–
  Sales . . . . . . . . . . . . . . . . . . . . .                              710,000                             282,000                                                              992,000
  Cost of sales . . . . . . . . . . . . . . . .            390,000                               130,000                                                                      520,000
  Expenses . . . . . . . . . . . . . . . . . . .           210,000                               120,000                                                                      330,000
  Equity in net income (of Subbco) . .                                          32,000                                               32,000         1                                        –0–
                                                         1,795,000           1,795,000           598,000           598,000          112,000                      112,000      850,000   992,000
                                                                                                                                                                                                                           THE TRIAL BALANCE WORKSHEET TECHNIQUE




  Consolidated net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   142,000              142,000
  Consolidated retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                         180,000     180,000
                                                                                                                                                                              992,000   992,000                960,000

  Explanation of entry:
  1 The basic elimination entry.
                                                                                                                                                                                                                           3

								
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