Sample Company

Question 1

A new employee has been given responsibility for preparing the consolidated financial statements of Sample Company. After having attempted to work alone for some time, the employee is seeking assistance to gain an overall understanding of the ways in which the consolidation process works. You have been asked to provide assistance in explaining the consolidation process. Describe how you would frame your comments, accounting for each of the following questions:

1. Why must the eliminating entries be entered in the consolidation worksheet each time consolidated statements are prepared?
2. How is the beginning-of-period noncontrolling interest balance determined?
3. How is the end-of-period noncontrolling interest balance determined?
4. Which of the subsidiary’s account balances must always be eliminated?
5. Which of the parent company’s account balances must always be eliminated?

Question 2

Assume that because of a new law, the types of significant transactions a partnership engages in are no longer lawful. Two of the five partners wish to wind up and terminate the partnership. Discuss the following:

1. Can these two partners require the partnership to be terminated?
2. Discuss the accounting for a liquidation where there is no deficit.
3. Discuss how the accounting differs if there is a deficit in one of the partner’s capital accounts
4. How would the accounting for a liquidation differ for a lump-sum payment vs. installment payments?