Consolidation Case Study Example | Topics and Well Written Essays - 750 words

Consolidation - Case Study Example The preparation of the consolidated financial statements DOES NOT involve any adjustments to the financial statements of either the parent or the subsidiary companies. In this case, the parent is Batman and the subsidiary is Robin. A. This means that the investing company, Batman is willing to pay more that the total value of the stockholder's equity. There are many good reason why companies agree to pay more than the acquired company's actual net worth. some of the reasons are: A. The pre acquisition journal entry is also known as the elimination entry. The journal entry made such as investment in subsidiary is credited. The original entry where the stockholders' equity amounts are credited is now debited. The main reason for such pre -acquisition entry is to produce a correct combined financial statement where the assets, liabilities and stockholders' equity accounts are lumped together. Based on the above declaration, the dividends declared after acquisition is bigger than the dividends declared before acquisition. The main reason is that the income derived from combined financial statement shows that the is higher then the pre acquisition net income.