Overview
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Description
Assignment Details
This assignment is designed to help you apply Generally Accepted Accounting Principles (GAAP) to the preparation of consolidated financial statements. You will demonstrate your ability to account for a business combination, recognize and measure goodwill, eliminate intercompany transactions, and prepare a simplified consolidation worksheet.
You are the senior accountant for Phoenix Holdings, which recently acquired 80% of Summit Tech Inc., on January 1, 2024, for $1,200,000. At the acquisition date, the book value of Summit Tech’s net assets was $1,000,000, and the fair value was assessed at $1,100,000. The difference is attributable to equipment undervalued by $100,000 (remaining useful life of 5 years). Summit Tech reported a net income of $200,000 and paid dividends of $40,000 during 2024.
Use the following information to complete this assignment:
- Part 1: Apply GAAP to Business Combination Accounting
- Identify and explain which GAAP principles apply to the consolidation of Phoenix Holdings and Summit Tech Inc.
- Calculate goodwill (if any) resulting from the acquisition.
- Determine the non-controlling interest (NCI) in Summit Tech at the acquisition date and at year-end.
- Part 2: Elimination and Consolidation Worksheet (Year-End 2024)
- Prepare a simplified consolidation worksheet for the year ended December 31, 2024, including the following:
- Elimination of the parent’s investment in the subsidiary against the subsidiary’s equity
- Recognition of any excess purchase price allocations (e.g., undervalued equipment)
- Adjustment for depreciation on the excess value of equipment
- Elimination of intercompany dividends
- Presentation of consolidated net income and equity
- Prepare a simplified consolidation worksheet for the year ended December 31, 2024, including the following:
- Part 3: Journal Entries (in the Parent's Books)
- Prepare journal entries for the parent company to:
- Record the acquisition of Summit Tech
- Record equity in net income of the subsidiary (if using the equity method)
- Record dividend income from the subsidiary
- Prepare journal entries for the parent company to:
You may use this template to complete this part of your assignment: U3 IP Excel Template.
- Part 4: Deliverables
- Using the information above and the work you have done, complete the following:
- Create a written explanation of GAAP principles and goodwill calculation (Part 1).
- Include a completed consolidation worksheet in table or Excel format (Part 2).
- Include properly formatted journal entries with brief explanations (Part 3).
- Using the information above and the work you have done, complete the following:
You may use this template to complete this part of your assignment: U3 IP Template.
Please submit your assignment.
For assistance with your assignment, please use your textbook and all course resources.
Individual Project Rubric
The Individual Project (IP) Grading Rubric is a scoring tool that represents the performance expectations for the IP. This Individual Project Grading Rubric is divided into components that provide a clear description of what should be included within each component of the IP. It’s the roadmap that can help you in the development of your IP.
| Expectation | Points Possible | Points Earned | Comments |
Correct application of GAAP principles | 25 | ||
Accuracy of goodwill and NCI calculations | 25 | ||
Accuracy and completeness of consolidation worksheet | 35 | ||
Accuracy and clarity of journal entries | 30 | ||
| Professional Language: Assignment contains accurate grammar, spelling, and punctuation, with few or no errors | 10 | ||
Total Points | 125 | ||
Total Points Earned |
Requirements: 3-6 pages