I would like to record about the key points of the US CPA exam content.
<Create and note the points based on mainly Becker’s workbook>
Consolidation elimination items
- Elimination of parent company investment and subsidiary equity, including the recognition of identifiable asset, liabilities, and goodwill.
- Elimination of unrealized profit
- Elimination of internal transactions of intercompany goods sales: (DR) Sales 500, (CR) COGS 420, Inventory 80.
- Elimination of internal transaction of Equipment sale: (DR) Gain on sale 400, (CR) Accumulated depreciation 150 (original amount + dep. adjustment), Depreciation expense 50, Equipment 200 (sales amount – original amount).
- Elimination of intercompany receivables and payables
- Elimination of intercompany dividends (DR) Dividend Income 180, Non-controlling Interest 120 / (CR) Retained Earnings(Dividend Paid) 300
- Dividends paid by the subsidiary to noncontrolling shareholders are reported in the cash flows statement. Dividends paid to the parent company are not reported.
- Recognize the noncontrolling interest : (DR) Consolidated Net Income : 100 / (CR) Net income attributable to parent company’s shareholders 80, Net income attributable to non-controlling interest : 20.
Consolidated stockholder’s Equity
- Common stock
- Additional paid-in capital
- Noncontrolling interest (Initial recognition of Noncontrolling interest as fair value+ NCI share of net income, – NCI share of dividends). Non-controlling interests in consolidation are measured at fair value based on the acquisition cost.
- Retained earnings (The portion of the subsidiary’s profits attributable to the parent company after the acquisition)
- OCI
Impairment expense
- (DR) Impairment expense 100 / (CR) Goodwill 100
- Goodwill is not amortized.
