Consolidating financial statements worksheet
The purpose of such acquisitions ranges from ensuring a source of raw materials (such as oil), to desiring to enter into a new industry, or seeking income on the investment.Both corporations remain separate legal entities, regardless of the investment purpose.
Control is ordinarily established once ownership jumps over 50%, but management contracts and other similar arrangements may allow control to occur at other levels.
However, since a central management controls the parent and its subsidiaries and they are related to each other, the parent company usually must prepare one set of financial statements.
These statements, called consolidated statements, consolidate the parent’s financial statement amounts with its subsidiaries’ and show the parent and its subsidiaries as a single enterprise.
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Assume Premier Tools Company bought 100% of the stock of Sledge Hammer Company.