Example
A was incorporated on 1 January 20X5. On 1 January 20X7 it acquired 100% of the ordinary shares in B which was incorporated on that day. Two years later, on 31 December 20X9, the balance sheet of the two companies were as follow.
Prepare a consolidated balance sheet at 31 December 20X9 for A and its subsidiary.
Solution
- Non-current assets: $10,000 + $5,000 = $15,000
- Net current assets: $5,000 + $3,000 = $8,000
- Share capital: $10,000. The $5,000 investment in B appearing in the A balance sheet is cancelled by the $5,000 share capital in the balance sheet of A.
- Accumulated profits: $10,000 + $3,000 = $13,000.
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