CHAPTER 4

CONSOLIDATED FINANCIAL STATEMENT

1. INTRODUCTION

Recall that business combination, which has been discussed in chapter 3, may be
negotiated either as asset acquisitions or as stock acquisition, and the focus was on
business combinations arising from asset acquisition. In those situations the acquiring
company survived, and the acquired company or companies ceased to exist as the
separate legal entities.

The focus in this chapter is on accounting practices followed in stock acquisition, that is,
when one company controls the activities of another company through the direct or
indirect ownership of some or all of its voting stock.

When this occurs, the acquiring company is generally referred to as the parent and the
acquired company as a subsidiary. Those holding any remaining stock in a subsidiary
are referred to as the noncontrolling (minority) interest.

Any joint relationship is termed an affiliation, and the related companies are called
affiliated companies. Each of the affiliated companies continues its separate legal
existence, and the investing company carries its interest as an investment.

2. CONSOLIDATED FINANCIAL STATEMENTS

The statements prepared for a parent company and its subsidiaries are called
consolidated financial statements. They include the full complement of statements
normally prepared for a separate entity and represent essentially the sum of the assets,
liabilities, revenues, and expenses of the affiliates after eliminating the effect of any
transactions among the affiliated companies.

The purpose of consolidated statements is to present, primarily for the benefit of the
owners and creditors of the parent, the results of operations and the financial position of
a parent company and all its subsidiaries as if the consolidated group were a single
economic entity.

3. RECORDING INVESTMENTS AT COST (PARENT’S BOOKS)

Illustration 4-1

Assume that P Company acquires all 10,000 shares of the common stock of S
Company for $25 per share and pays acquisition fees of $10,000. The entry to record
the investment on P Company’s books is:

Investment in S Company 250,000

Cash (10,000 * 25) 250,000

Acquisition Expense 10,000

Cash 10,000

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 The acquisition fee would be recorded in a separate entry as an expense.

If P Company issues stock in the acquisition, the investment is recorded at the fair
value of the stock issued, giving effect to any costs of registering the stock issue.
Assume that P Company issues 20,000 of its $10 par value common shares with a fair
value of $13 per share for the 10,000 shares of S Company, and that registration costs
amount to $5,000 paid in cash. The entries to record the investment on P Company’s
books are:

Investment in S Company (20,000 x 13) 260,000

Common Stock (20,000 x 10) 200,000
Other Contributed Capital (20,000 x 3) 60,000
Other Contributed Capital 5,000
Cash 5,000

If P Company paid an additional $10,000 as a finder’s fee, the entry would be:

Professional Fee Expense 10,000

Cash 10,000

4. CONSOLIDATED BALANCE SHEET

The consolidated balance sheet reports the sum of the assets and liabilities of a parent
and its subsidiaries as if they constituted a single company. Since the parent and its
subsidiaries are being treated as a single entity, eliminations must be made to cancel
the effects of transactions among them. Intercompany receivables and payables, for
example, must be eliminated to avoid double counting and to avoid giving the
impression that the consolidated entity owes money to itself.

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Intercompany accounts that must be eliminated are as follows:

Parent’s Accounts Subsidiary’s Accounts

Investment in subsidiary Against Equity accounts
Intercompany receivables (payable) Against Intercompany payable (receivable)
Advances to subsidiary (from Against Advances from parent (to parent)
subsidiary)
Interest revenue (interest expense) Against Interest expense (interest revenue)
Dividend revenue (dividends declared) Against Dividends declared (dividend
revenue)
Management fee received from Against Management fee paid to parent
subsidiary
Sales to subsidiary (purchased of Against Purchases of inventory from parent
inventory from subsidiary) (sales to parent)

5. INVESTMENT ELIMINATION

To start the consolidating process, a useful first step is to prepare a “Computation and
Allocation of Difference between Implied Value and Book Value” schedule (CAD).
Preparation of this schedule requires us to address three basic issues:
a. Determine the percentage of stock acquired in the subsidiary. (Is it a 100%
acquisition, or a smaller percentage?)
b. Use the purchase price (cost) to compute the implied value of the subsidiary.
Simply divide the purchase price by the percentage acquired to calculate this
value. If the percentage is 100%, the implied value will equal the purchase price.
c. Compare the implied value from step no. 2 to the book value of the subsidiary’s
equity. If a difference exists, we must then allocate that difference to adjust the
underlying assets and/or liabilities of the acquired company.

Illustration 4-2

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 Acquisition Price
is $585,000

: 75% purchsed

Implied Value
of 100% of S is
$780,000

Compare

Book Value of
S is $600,000

Difference =
$180,000

Mark identifiable
Increase to Land assets to market Increase to
$100,000 Building $50,000

Total Allocated
=$150,000

Residual = $30,000
Goodwill

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Illustration 4-3
Implied value of subsidiary is equal to book value of subsidiary company’s equity
(IV=BV) – total ownership (100% of subsidiary stock acquired).

Balance Sheet for P Company and S Company

January 1, 2015

P S Company
Company
Cash $ 100,000 $ 20,000
Other Current Assets 140,000 50,000
Plant and Equipment (net) 120,000 40,000
Land 40,000 20,000
Total Assets 400,000 130,000
Liabilities 60,000 50,000
Common Stock, $10 par value 200,000 50,000
Other Contributed Capital 40,000 10,000
Retained Earnings 100,000 20,000
Total Liabilities and Equity 400,000 130,000

Assume that on January 1, 2015, P Company acquired all the outstanding stock
(5,000 shares) of S Company for a cash payment of $80,000. P Company would
record this transaction as follows:

Investment in S Company 80,000

Cash 80,000

Schedule for computation and allocation of difference (between implied and book
values)

Parent Non Total Value

Share Controlling
Share
Purchase price and implied value $ 80,000 0 80,000
Less: Book value of equity acquired 80,000 0 80,000
Difference between implied and book 0 0 0
values

P Company and Subsidiary

Consolidated Balance Sheet Working Paper (100% Ownership)
January 1, 2015

Elimination Consolidate
P Co. S Co. d
Dr. Cr. Balances
Cash 20,000 20,000 40,000
Other Current Assets 140,000 50,000 190,000
Plant and Equipment 120,000 40,000 160,000

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 (net)
Land 40,000 20,000 60,000
Investment in S Company 80,000 80,000
Total Assets 400,00 130,000 450,000
0
Liabilities 60,000 50,000 110,000
Common Stock
P Company 200,000 200,000
S Company 50,000 50,000
Other Contributed Capital
P Company 40,000 40,000
S Company 10,000 10,000
Retained Earnings
P Company 100,000 100,000
S Company 20,000 20,000
Total Liabilities and 400,000 130,000 80,000 80,000 450,000
Equity

Illustration 4-4
Implied value of subsidiary is equal to book value of subsidiary company’s equity
(IV=BV) – partial ownership (less than 100% of subsidiary stock acquired).

Assume that on January 1, 2015, P Company acquired 90% (4,500 shares) of the
stock of S Company for $72,000. Since P Company owns less than 100% of S
Company’s stock, consideration must be given to the existence of a non controlling
interest (minority interest) in the net assets of S Company.

The purchase price of $72,000 for 90% of S Company implies a total valuation for S
Company of $72,000/90%, or $80,000. The non controlling interest is, thus, implied to
be valued at 10% x $80,000 or $8,000. In this illustration the implied and book values
are equal, for both controlling and non controlling interests. A computation and
Allocation of Difference (CAD) Schedule would be as follows:

Parent Non Total Value

Share Controlling
Share
Purchase price and implied value $ 72,000 8,000 80,000
Less: Book value of subsidiary equity
Common stock 45,000 5,000 50,000
Other contributed capital 9,000 1,000 10,000
Retained earnings 18,000 2,000 20,000
Total book value 72,000 8,000 80,000
Difference between implied and book 0 0 0
values

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P Company and Subsidiary
Consolidated Balance Sheet Working Paper (90% Ownership, IV = BV)
January 1, 2015

Elimination Consolidate
P Co. S Co. d
Dr. Cr. Balances
Cash (100,000 – 72,000) 28,000 20,000 48,000
Other Current Assets 140,000 50,000 190,000
Plant and Equipment 120,000 40,000 160,000
(net)
Land 40,000 20,000 60,000
Investment in S Company 72,000 72,000
Total Assets 400,00 130,000 458,000
0
Liabilities 60,000 50,000 110,000
Common Stock
P Company 200,000 200,000
S Company 50,000 50,000
Other Contributed Capital
P Company 40,000 40,000
S Company 10,000 10,000
Retained Earnings
P Company 100,000 100,000
S Company 20,000 20,000
Noncontrolling Interest 8,000 8,000
Total Liabilities and 400,000 130,000 80,000 80,000 458,000
Equity

Illustration 4-5
Implied value exceeds book value of subsidiary company’s equity (IV > BV) – partial
ownership (less than 100% of subsidiary stock acquired).

Assume that on January 1, 2015, P Company acquired 80% (4,000 shares) of the
stock of S Company for $74,000 cash. The purchase price of $74,000 for 80% of S
Company implies a total valuation for S Company of $74,000/80%, or $92,500. The non
controlling interest is, thus, implied to be valued at 20% x $92,500 or $18,500.

The total implied value of $92,500 exceeds the book value of equity of $80,000 by
$12,500. If we assume that the entire difference is attributable to land with a current
market value higher than its historical recorded cost, the computation and Allocation of
Difference (CAD) Schedule would be as follows:

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 Parent Non Total Value
Share Controlling
Share
Purchase price and implied value $ 74,000 18,500 92,500
Less: Book value of subsidiary equity
Common stock 40,000 10,000 50,000
Other contributed capital 8,000 2,000 10,000
Retained earnings 16,000 4,000 20,000
Total book value 64,000 16,000 80,000
Difference between implied and book 10,000 2,500 12,500
values
Adjust land upward (mark to market) -10,000 -2,500 -12,500
Balance 0 0 0

P Company and Subsidiary

Consolidated Balance Sheet Working Paper (80% Ownership, IV > BV)
January 1, 2015

Elimination Consolidate
P Co. S Co. d
Dr. Cr. Balances
Cash (100,000 – 74,000) 26,000 20,000 46,000
Other Current Assets 140,000 50,000 190,000
Plant and Equipment (net) 120,000 40,000 160,000
Land 40,000 20,000 12,500 72,500
Investment in S Company 74,000 74,000
Difference between implied
12,500 12,500
and book value
Total Assets 400,000 130,000 468,500
Liabilities 60,000 50,000 110,000
Common Stock
P Company 200,000 200,000
S Company 50,000 50,000
Other Contributed Capital
P Company 40,000 40,000
S Company 10,000 10,000
Retained Earnings
P Company 100,000 100,000
S Company 20,000 20,000
Noncontrolling Interest 18,500 18,500
Total Liabilities and Equity 400,000 130,000 105,000 105,000 468,500

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Illustration 4-6
Implied value of subsidiary is less than book value (IV < BV) – partial ownership (less
than 100% of subsidiary stock acquired).

Assume that on January 1, 2015, P Company acquired 80% (4,000 shares) of the
stock of S Company for $60,000 cash. The purchase price of $60,000 for 80% of S
Company implies a total valuation for S Company of $60,000/80%, or $75,000. The non
controlling interest is, thus, implied to be valued at 20% x $75,000 or $15,000.
=100/80 x $60,000 = $75,000

Assume that the difference between implied and book values is attributable to plant and
equipment, in this case an over valuation of $5,000.

The Computation and Allocation of Difference (CAD) Schedule would appear as

follows:

Parent Non Total Value

Share Controlling
Share
Purchase price and implied value $ 60,000 15,000 75,000
Less: Book value of subsidiary equity
Common stock 40,000 10,000 50,000
Other contributed capital 8,000 2,000 10,000
Retained earnings 16,000 4,000 20,000
Total book value 64,000 16,000 80,000
Difference between IV and BV (4,000) (1,000) (5,000)
Adjust Plant and Equipment downward 4,000 1,000 5,000
Balance 0 0 0

P Company and Subsidiary

Consolidated Balance Sheet Working Paper (80% Ownership, IV < BV)
January 1, 2015

Elimination Consolidate
P Co. S Co. d
Dr. Cr. Balances
Cash (100,000 – 60,000) 40,000 20,000 60,000
Other Current Assets 140,000 50,000 190,000
Plant and Equipment 120,000 40,000 5,000 155,000
Land 40,000 20,000 60,000
Investment in S Company 60,000 60,000
Difference between implied
5,000 5,000
and book value
Total Assets 400,000 130,000 465,000
Liabilities 60,000 50,000 110,000
Common Stock
P Company 200,000 200,000
S Company 50,000 50,000

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 Other Contributed Capital
P Company 40,000 40,000
S Company 10,000 10,000
Retained Earnings
P Company 100,000 100,000
S Company 20,000 20,000
Noncontrolling Interest 15,000 15,000
Total Liabilities and Equity 400,000 130,000 85,000 85,000 465,000

6. SUBSIDIARY TREASURY STOCK HOLDING

A Subsidiary may hold some of its own shares as treasury stock at the time the parent
company acquires its interest. Recall that treasury stock is a contra-equity account,
which has a debit balance on the books of the subsidiary. The computation of the
percentage interest acquired, as well as the total equity acquired, is based on shares
outstanding and should, therefore, exclude treasury shares.

Illustration 4.7.
Assume P Company acquired 18,000 shares of S Company common stock on January
1, 2015, for a payment of $320,000 when S Company’s stockholders’ equity section
appeared as follows:

Common Stock, $10 par, 25,000 shares issued $ 250,000

Other contributed capital 50,000
Retained earnings 125,000
425,000
Less: Treasury stock at cost, 1,000 shares 20,000
Total stockholders’ equity 405,000

P Company’s interest in S Company is 75% (18,000 shares/24,000 shares), and the

total implied value of S Company is $320,000/75% or $426,667. The implied value of
the noncontrolling interest is: $25% x $426,667 = 106,667. This results in difference
between implied value and book values of $426,667 - 405,000 = $21,667

Because the treasury stock account represent a contra stockholders’ equity account, it
must be eliminated by a credit when the investment account and subsidiary company’s
equity accounts are eliminated on the working paper. Thus , the workpaper eliminating
entry is:

Common Stock – S Company 250,000

Other Contributed Capital – S Company 50,000
Retained Earning – S Company 125,000
Difference between IV and BV 21,667
Investment in S-Company 320,000
Non – Controlling Interest in Equity 106,667
Treasury Stock – S Company 20,000

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7. OTHER INTERCOMPANY BALANCE SHEET ELIMINATIONS

Balance sheet eliminations of a variety of intercompany receivables and payables are

also often required. Intercompany accounts receivable, notes receivable, and interest
receivable, for example, must be eliminated against the reciprocal accounts payable,
notes payable, and interest payable.

Illustration 4.8
To eliminate a $25,000 cash advance made by P Company and received by S
Company, the entry would be:

Avance for P Company 25,000

Advance to S Company 25,000

Similarly, to eliminate a $100,000 intercompany account receivable /payable, the entry

would be:

Account Payable (to S) 100,000

Account Receivable (From S) 100,000

8. ADJUSTING ENTRY PRIOR TO ELIMINATING ENTRY

The need for adjustments generally arises because of in-transit items where only one of
the affiliates has recorded the effect of an intercompany transaction. For example, the
parent company may have recorded a cash advance to one of its subsidiaries near
year-end but the subsidiary has not yet recorded the receipt of the advance. Thus, the
advances to subsidiary account on the parent company’s books has no reciprocal
account on the subsidiary company’s books. An adjusting workpaper entry debiting
cash and crediting advances from parent is required so that the asset (cash) can be
appropriately included in consolidated assets and a reciprocal account established that
permits the elimination of intercompany advances.

9. CONSOLIDATION FOR MORE THAN ONE SUBSIDIARY

Illustration 4.9.

Assume that on January 1, 2015 P Company acquired 90% and 80% of the outstanding
common stock of S Company and T Company for $250,200 and $115,000, respectively.
Immediately after the stock acquisition, balance sheets of the affiliates were as follows:

P Company S Company T Company

Cash $ 81,800 36,000 4,000
Account Receivable (net) 68,000 59,000 10,000
Inventories 76,000 64,000 15,000
Advances to T Company 20,000
Investment in S Company 250,200
Investment in T Company 115,000

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 Plant and Equipment (net) 200,000 241,000 130,000
Land 24,000 10,000 6,000
Total assets 835,000 410,000 165,000
Account Payable 85,000 40,000 25,000
Notes Payable 0 100,000 0
Common Stock, $10 par value 500,000 200,000 100,000
Retained Earnings 250.000 70,000 40,000
Total Liabilities and Equity 835,000 410,000 165,000

Other information:
1. On the date of acquisition, P Company mailed a cash advance of $20,000 to T
Company to improve T Company’s working capital position. T Company had not
yet received and, therefore had not yet recorded the advance.
2. On the date of acquisition, P Company owed S Company $6,000 for purchases on
open account, and S Company owed T Company $5,000 for such purchases. All
these items had been sold by the purchasing companies prior to the date of
acquisition.
3. The difference between implied and the book values of equity relates to the
undervaluation of subsidiary plant and equipment.

Since the investments are carried in two separate accounts, it is best to prepare two
separate CAD Schedules, one for each investment, as follows:

Computation and Allocation Difference (Between Implied and Book Values) For
Investment in S Company.

Parent Non Total Value

Share Controlling
Share
Purchase price and implied value $ 520,200 27,800 278,000
Less: Book value of subsidiary equity
Common stock 180,000 20,000 200,000
Retained earnings 63,000 7,000 270,000
Total book value 243,000 27,000 80,000
Difference between IV and BV 7,200 800 8,000
Adjust plant assets upward (7,200) (800) (8,000)
Balance 0 0 0

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Computation and Allocation Difference (Between Implied and Book Values) For
Investment in T Company.

Parent Non Total Value

Share Controlling
Share
Purchase price and implied value $ 115,000 28,750 143,750
Less: Book value of subsidiary equity
Common stock 80,000 20,000 100,000
Retained earnings 32,000 8,000 40,000
Total book value 112,000 28,000 140,000
Difference between IV and BV 3,000 750 3,750
Adjust plant assets upward (3,000) (750) (3,750)
Balance 0 0 0

P Company and Subsidiary

Consolidated Balance Sheet Workpaper
January 1, 2015

Elimination Consol.
P Co. S Co. T Co.
Dr. Cr. Balances
Cash 81,800 36,000 4,000 20,000 141.800
Acc. Rec. (net) 68,000 59,000 10,000 11,000 126,000
Inventories 76,000 64,000 15,000 155,000
Adv. to T Co. 20,000 20,000
Inv. in S Co. 250,200 250,200
Inv. in T Co. 115,000 115,000
Pl. & Eq. (net) 200,000 241,000 130,000 8,000 582.750
3,750
Land 24,000 10,000 6,000 40,000
Div. IV and BV 8,000 8,000
3,750 3,750
Total Assets 835,000 410,000 165,000 1,045,550
Acc. Payable 85,000 40,000 25,000 11,000 139,000
Notes Payable 0 100,000 0 100,000
Common Stock
P Company 500,000 500,000
S Company 200,000 200,000
T Company 100,000 100,000
Ret. Earning
P Company 250.000 250,000
S Company 70,000 70,000
T Company 40,000 40,000
Adv. From P Co. 20,000 20,000
Noncontr. Interest 27.800 56.550
28,750
Total liab. & equit. 835,000 410,000 165,000 484,500 484,500 1,045,550

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Exercise:

4.1. On January 1, 2015, Polo Company purchase 100% of the common stock of Save
Company by issuing 40,000 shares of its (Polo’s) $10 par value common stock
with a market price of $17.50 per share. Polo incurred cash expenses of $20,000
for registering and issuing the common stock. The stockholders’ equity section of
the two companies’ balance sheets on December 31, 2014, were:

Polo Save
Common stock, $10 par value $ 350,000 $ 320,000
Other contributed capital 590,000 175,000
Retained earnings 380,000 205,000

Required:
A. Prepare journal entry on the book of Polo Company to record the purchase
of the common stock of Save Company and related expenses.
B. Prepare the elimination entry required for the preparation of a consolidated
balance sheet workpaper on the date of acquisition.

4.2. On January 1, 2015, Prunce Company acquired 90% of the outstanding common
stock of Sun Company for $192,000 cash. Just before acquisition, the balance
sheets of the two companies were as follows:

Prunce Sun
Cash $ 260,000 $ 64,000
Accounts Receivable 142,000 23,000
Inventory 117,000 54,000
Plant and equipment 386,000 98,000
Land 63,000 32,000
Total asset $ 968,000 $ 271,000
Accounts payable $ 104,000 47,000
Mortgage payable 72,000 39,000
Common stock, $2 par value 400,000 70,000
Other contributed capital 208,000 20,000
Retained earnings 184,000 95,000
Total equities $ 968,000 $ 271,000

The fair values of Sun Company’s assets and liabilities are equal to their book
values with the exception of land.

Required:
A. Prepare a journal entry to record the purchase of Sun Company’s common
stock.
B. Prepare a consolidated balance sheet at the date of acquisition.

4.3. On January 1, 2015 Peach Company issued 1,500 of its $20 par value common
shares with a fair value of $60 per share in exchange for the 2,000 outstanding
common shares of Swartz Company in a purchase transaction. Registration costs

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 amounted to $1,700, paid in cash. Just prior to the acquisition, the balance sheets
of the two companies were as follows:

Peach Swartz
Cash $ 73,000 $ 13,000
Accounts Receivable 95,000 19,000
Inventory 58,000 25,000
Plant and equipment 95,000 43,000
Land 26,000 22,000
Total asset $ 347,000 $ 122,000
Accounts payable $ 66,000 18,000
Mortgage payable 82,000 21,000
Common stock, $20 par value 100,000 40,000
Other contributed capital 60,000 24,000
Retained earnings 39,000 19,000
Total equities $ 347,000 $ 122,000

Any difference between the book value of equity and the value of implied by the
purchase price related to goodwill.

Required:
A. Prepare journal entry on Peach Company’s book to record the exchange of
stock.
B. Prepare a Computation and Allocation Schedule for the difference between
book value and value implied by the purchase price.
C. Prepare a consolidated balance sheet at the date of acquisition.

4.4. Pool Company purchase 90% of the outstanding common stock of Spruce
Company on December 31, 2014 for cash. At that time the balance sheet of
Spruce Company was as follows:

Current assets $ 1,050,000

Plant and equipment 990,000
Land 170,000
Total asset $ 2,210,000
Liabilities 820,000
Common stock, $20 par value 900,000
Other contributed capital 440,000
Retained earnings 150,000
Total 2,310,000
Less: Treasury stock at cost, 5000 shares 100,000
Total liabilities and equities 2,210,000

Required:
Prepare the elimination entry required for the preparation of a consolidated
balance sheet workpaper on December 31, 2014, assuming:
(1) The purchase price of the stock was $1,400,000. Assume that any difference
between the book value of net assets and the value implied by the purchase
price relates to subsidiary land.

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 (2) The purchase price of the stock was $1,160,000. Assume that the subsidiary
land has a fair value of $180,000, and the other assets and liabilities are
fairly valued.

4.5. On December 31, 2014, Price Company purchased a controlling interest in

Shipley Company. The balance sheet of Price Company and the consolidated
balance sheet on December 31, 2014, were as follows:

Price Co. Consolidated

Cash $ 22,000 $ 37,900
Accounts Receivable 35,000 57,000
Inventory 127,000 161,600
Investment in Shipley Company 212,000 0
Plant and equipment (net) 190,000 337,000
Land 120,000 220,412
Total $ 706,000 $ 813,912
Accounts payable $ 42,000 112,500
Note payable 100,000 100,000
Noncontrolling interest in Shipley Co. 0 37,412
Common stock 300,000 300,000
Other contributed capital 164,000 164,000
Retained earnings 100,000 100,000
Total $ 706,000 $ 813,9120

On the date of acquisition, the stockholders’ equity section of Shipley Company’s

balance sheet was as follows:

Common stock $ 90,000

Other contributed capital 90,000
Retained earning 56,000
Total $ 236,000

Required:
A. Prepare the investment elimination entry made to complete a consolidated
balance sheet workpaper. Any difference between book value and the value
implied by the purchase price relate to subsidiary land.
B. Prepare Shipley Company’s balance sheet as it appeared on December 31,
2014.

4.6. Intercompany Receivable and Payable

Polychromasia, Inc. had a number of receivables from subsidiaries at the balance
sheet date, as well as several payables to subsidiaries. Of its five subsidiaries,
four are consolidated in the financial statements (Green Company, Blanck Inc.,
White & Sons, and Silver Co.). Only the Brown Company is not consolidated with
Polychromasia and the other affiliates. The following list of receivables and
payables shows balances at 12/31/2014.
Interest receivable from the Brown Company.................... $ 50,000
Interest payable to Black Inc.............................................. 75,000
Intercompany payable to Silver Co.................................... 105,000

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 Long-term advance to Green Company............................. 150,000
Long-term payable to Silver Co.......................................... 450,000
Long-term receivable from Brown Company...................... 500,000

Required:
A. Show the classification and amount(s) that should be reported in the
consolidated balance sheet of Polychromasia, Inc. and Subsidiaries at
12/31/2014 as receivable from subsidiaries.
B. Show the classification and amount(s) that should be reported in the
consolidated balance sheet of Polychromasia, Inc., and Subsidiaries at
12/31/2014 as payable to subsidiaries.

****

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