Advanced financial accounting PowerPoint presentation. In this presentation we will discuss the consolidation process and a situation where the subsidiary issues stock dividends we have stock default dividends issued by the subsidiary what will be the effect on the consolidation process get ready to account with advanced financial accounting. We’re talking about a consolidation process where the subsidiary then issued stock dividends. So we have stock dividends are issued to all common stockholders proportionally, therefore, the relative interest of the controlling and non controlling stockholders is not changed. So that relative interest isn’t changed, so we don’t have to worry about that which is nice. The carrying amount on the parents books is also not changed. So we’re not going to have to change anything on the books of the parent with basically an adjustment to the investment account using you know, typically the equity method, which is nice stockholders equity accounts for the subsidiary do change. So we do have a change to the stock There’s equity on the subsidiary, but total stockholders equity does not. So in other words, if we take stockholders equity as a whole, there’s no change there, even though there’s changes within the stockholders equity of the subsidiary. So we’re here we’re going to say this stock dividends represent a permanent capitalization of retained earnings. That’s basically what is happening, permanent capitalization of the retained earnings.
Posts with the stockholders equity tag
Subsidiary Sells Additional Shares to Parent
Advanced financial accounting PowerPoint presentation in this presentation will discuss a consolidation process where we have a parent subsidiary relationship and the subsidiary sells additional shares to the parent. So we have a situation where we have the subsidiary selling additional shares to the parent, what’s going to be the effect on the Consolidated Financial Statements get ready to account with advanced financial accounting. We’re talking about a situation here where the subsidiary is going to sell additional shares to the parent and the price is going to be equal to the book value of the existing shares. In that case, it’s going to increase the parents ownership percent, because the parent now has more stocks and no one else got more stocks. Therefore, their percent ownership is increasing. The increase in the parents investment accounts will equal the increase in the stockholders equity of the subsidiary the book value of the non controlling interest is not changed and the normal consolidation entries will be made based on the parents and new ownership percent. So obviously when we do The consolidation entries, we’re going to be basing them on the new ownership percent, that’s going to be the more simple kind of situation where we have the price equal to the book value. What if there’s a sale of additional shares to the parent at an amount of different than the book value, so we still have shares going from the subsidiary to the parent, but now the amount is different than the book value. This increases the carrying amount of the parents investment by the fair value of the consideration. So in other words, the carrying amount of the parents investment in the subsidiary is going to go up by that what was paid for it that consideration given whether that be cash at the fair value of something other than cash. At consolidation, the amount of a non controlling interest needs to be adjusted to reflect the change in its interest in the subsidiary.