| Company Y—Balance Sheet | |||
| Cash | $ 25,000.00 | Notes Payable X | $100,000.00 |
| Accounts Receivable | 125,000.00 | Accounts Payable | 25,000.00 |
| Notes Receivable | 100,000.00 | Bonds | 75,000.00 |
| Notes Receivable Z | 50,000.00 | Capital Stock | 500,000.00 |
| Z (open account) | 50,000.00 | Surplus | 25,000.00 |
| Merchandise | 75,000.00 | ||
| Plant | 300,000.00 | ||
| $725,000.00 | $725,000.00 | ||
| Company Z—Balance Sheet | |||
| Cash | $ 40,000.00 | Company X | |
| Accounts Receivable | 180,000.00 | (open account) | $250,000.00 |
| Notes Receivable | 230,000.00 | Notes Payable Y | 50,000.00 |
| Merchandise | 150,000.00 | Company Y | |
| Plant | 350,000.00 | (open account) | 50,000.00 |
| Capital Stock | 450,000.00 | ||
| Surplus | 150,000.00 | ||
| $950,000.00 | $950,000.00 | ||
Solution
| Working Sheet | |||
|---|---|---|---|
| Assets | Co. X | Co. Y | Co. Z |
| Cash | $ 50,000.00 | $ 25,000.00 | $ 40,000.00 |
| Notes Receivable | 100,000.00 | 230,000.00 | |
| Notes Receivable Y | 100,000.00 | ||
| Notes Receivable Z | 50,000.00 | ||
| Accounts Receivable | 125,000.00 | 180,000.00 | |
| Advances to Z | 250,000.00 | ||
| Co. Z (open account) | 50,000.00 | ||
| Stock Y | 300,000.00 | ||
| Stock Z | 550,000.00 | 550,000.00 | |
| Merchandise | 75,000.00 | 150,000.00 | |
| Patents | 500,000.00 | ||
| Other Property | 100,000.00 | ||
| Plant | 300,000.00 | 350,000.00 | |
| Good-Will | |||
| $1,850,000.00 | $725,000.00 | $950,000.00 | |
| Liabilities and Capital | |||
| Notes Payable | $ 100,000.00 | $ . . . . . . . . . | $ . . . . . . . . . |
| Notes Payable X | 100,000.00 | ||
| Notes Payable Y | 50,000.00 | ||
| Accounts Payable | 25,000.00 | ||
| Co. X (open account) | 250,000.00 | ||
| Co. Y (open account) | 50,000.00 | ||
| Bonds | 500,000.00 | 75,000.00 | |
| Capital Stock | 1,000,000.00 | 500,000.00 | 450,000.00 |
| Surplus | 250,000.00 | 25,000.00 | 150,000.00 |
| $1,850,000.00 | $725,000.00 | $950,000.00 | |
| Assets | Combined | Elimination | Consolidated |
|---|---|---|---|
| Cash | $ 115,000.00 | $ 115,000.00 | |
| Notes Receivable | 330,000.00 | 330,000.00 | |
| Notes Receivable Y | 100,000.00 | (a) 100,000.00 | |
| Notes Receivable Z | 50,000.00 | (b) 50,000.00 | |
| Accounts Receivable | 305,000.00 | 305,000.00 | |
| Advances to Z | 250,000.00 | (c) 250,000.00 | |
| Co. Z (open account) | 50,000.00 | (d) 50,000.00 | |
| Stock Y | 300,000.00 | (e) 300,000.00 | |
| Stock Z | (f) 550,000.00 | ||
| Merchandise | 225,000.00 | (g)[73] 15,000.00 | 210,000.00 |
| Patents | 500,000.00 | 500,000.00 | |
| Other Property | 100,000.00 | 100,000.00 | |
| Plant | 650,000.00 | 650,000.00 | |
| Good-Will | (f)[74] 100,000.00 | 100,000.00 | |
| $3,525,000.00 | $1,215,000.00 | $2,310,000.00 | |
| Liabilities and Capital | |||
| Notes Payable | $ 100,000.00 | $ . . . . . . . . . | $ 100,000.00 |
| Notes Payable X | 100,000.00 | (a) 100,000.00 | |
| Notes Payable Y | 50,000.00 | (b) 50,000.00 | |
| Accounts Payable | 25,000.00 | 25,000.00 | |
| Co. X (open account) | 250,000.00 | (c) 250,000.00 | |
| Co. Y (open account) | 50,000.00 | (d) 50,000.00 | |
| Bonds | 575,000.00 | 575,000.00 | |
| Capital Stock | 1,950,000.00 | (e) 300,000.00 | 1,000,000.00 |
| (f) 450,000.00 | 200,000.00 | ||
| Surplus | 425,000.00 | (g) 15,000.00 | 410,000.00 |
| $3,525,000.00 | $1,215,000.00 | $2,310,000.00 | |
| Company X and its Subsidiaries Consolidated Balance Sheet | |||
| Assets | Liabilities and Capital | ||
| Cash | $ 115,000.00 | Notes Payable | $ 100,000.00 |
| Notes Receivable | 330,000.00 | Accounts Payable | 25,000.00 |
| Accounts Receivable | 305,000.00 | Bonds | 575,000.00 |
| Merchandise | 210,000.00 | Total Liabilities. | $700,000.00 |
| Other Property | 100,000.00 | ||
| Plant | 650,000.00 | Capital Stock of Co. X | 1,000,000.00 |
| Patents | 500,000.00 | Capital Stock of Subsidiaries | |
| Good-Will | 100,000.00 | not owned by Co. X | 200,000.00 |
| Surplus of Affiliated Companies. | 400,000.00 | ||
| Surplus of Minority Interests. | 10,000.00 | ||
| $2,310,000.00 | $2,310,000.00 | ||
Comments on Problem. There is little in the solution to which attention need be directed. In the handling of the capital stock items, it will be noted that only $300,000 of Company Y’s stock is eliminated, the remainder of $200,000 being shown on the consolidated balance sheet as a minority interest. In eliminating Company Z’s capital stock, it becomes necessary to bring a good-will item of $100,000 onto the consolidated balance sheet. This is shown on the working sheet by means of the three “f” items in the “Elimination” column. On the consolidated balance sheet it will be noted that the minority interest in Surplus (40% of $25,000, Y’s surplus) is not shown affected by the reduction of Y’s inventory to a cost basis. The solution assumes that all the surplus items on the balance sheets of the various companies represent operating surplus accumulated since the purchase of the subsidiaries by the holding company.
This problem calls attention to some of the questions encountered in handling the consolidated balance sheet, although in practice much more complicated situations arise. All that can be hoped for here is to impress upon the student some fundamental principles to be observed and to point out some of the methods used in order best to express the relations of the various interests in the business. The idea of the consolidated balance sheet is simple in concept but usually difficult of full realization.
CHAPTER XXXV
ACCOUNTS AND REPORTS OF
RECEIVERS AND TRUSTEES
Appointment of Assignee or Receiver