Consolidated Balance Sheet Example | Parent, Subsidiary & NCI

Work through a basic consolidated balance sheet for a parent buying 80% of a subsidiary. Advanced accounting students and CPA candidates will compare parent-only assets with consolidated assets, liabilities, and equity, including noncontrolling interest (NCI). CORRECTION AT 05:19–05:31: The purchase entry is debit Investment in Subsidiary $44,000 and credit Cash $44,000. The narrated and handwritten $470,000 entry is incorrect; $470,000 is the parent's total assets, which remain unchanged by exchanging cash for an investment. EXAMPLE AND ANSWERS Before the purchase, Parent has assets of $470,000, liabilities of $270,000 and equity of $200,000. Sub has assets of $190,000, liabilities of $135,000 and equity of $55,000. Parent pays Sub's existing shareholders $44,000 cash for 80% of the voting shares. Using the lesson's simplified assumptions: • Parent-only assets: $470,000 − $44,000 cash + $44,000 investment = $470,000. • Consolidated assets: $470,000 − $44,000 + $190,000 = $616,000. • Consolidated liabilities: $270,000 + $135,000 = $405,000. • Implied total equity value: $44,000 ÷ 80% = $55,000. • NCI: 20% × $55,000 = $11,000. • Consolidated equity: $200,000 parent equity + $11,000 NCI = $211,000. • Check: $405,000 + $211,000 = $616,000. Why include 100% of Sub's assets and liabilities after buying only 80%? This example assumes Parent controls Sub. Consolidation presents the controlled group together, with the outside ownership reflected as NCI. The parent's Investment in Sub and Sub's separate preacquisition equity are eliminated; they are not both added to group equity. ASSUMPTIONS MATTER The answer assumes no acquisition-date fair value adjustments, goodwill, other acquisition costs, or intercompany balances, and proportional pricing for the controlling and noncontrolling shares. These are simplifying assumptions used in the walkthrough, not facts established merely because $44,000 ÷ 80% equals Sub's book equity. Equal aggregate values alone do not prove that each asset and liability has no fair value adjustment. Under U.S. GAAP business-combination accounting, NCI is measured at acquisition-date fair value. Grossing up the parent's purchase price is not universally appropriate: control premiums or noncontrolling-interest discounts can make per-share values differ. The simplified $11,000 answer depends on the stated assumptions. CHAPTERS 00:00 Consolidation lesson and study resources 01:45 Four questions and practice formats 03:06 Parent and subsidiary balance-sheet facts 04:04 Control and the consolidation discussion 04:34 Parent-only assets after the purchase 05:19 Purchase entry: see $44,000 correction below 05:48 Consolidated assets: $616,000 07:14 MCQ and simulation presentation 07:38 Historical exam advice: see current clarification 08:45 Consolidated liabilities: $405,000 09:33 Parent equity and noncontrolling interest 10:44 Implied value and the $11,000 NCI 11:50 Consolidated equity: $211,000 12:20 Check the accounting equation 12:31 Further study resources CURRENT CLARIFICATIONS Financial-reporting consolidation depends on a controlling financial interest. More than 50% of voting shares is the usual voting-interest condition, subject to exceptions; “50%” alone is not a universal threshold, and other consolidation models may apply. The tax aside is separate: IRC section 1504 generally requires at least 80% of BOTH voting power and value, plus other requirements, for affiliated-group status. The claim around 08:06–08:40 that missed consolidation questions trigger repeated questions on that weakness should not be relied on. AICPA replaced multistage adaptive MCQ testing with a linear design in 2024. A passing score of 75 is a scaled score, not 75% correct. Recorded in 2020; the case date is 20X3. Current FAR covers preparing consolidated financial statements, including NCI; BAR covers business-combination accounting and related acquisition concepts. This basic exercise is not a complete acquisition-method worksheet or an identified official released exam item. CONTINUE LEARNING Acquisition-Date Consolidation & Goodwill:    • Acquisition-Date Consolidation & Goodwill ...   CPA FAR practice:    • CPA FAR Practice Questions & Task-Based Si...   Advanced Accounting:    • Advanced Accounting Full Course | Universi...   More lessons and practice: https://farhatlectures.com Official exam scoring: https://www.aicpa-cima.com/resources/... Current exam coverage: https://www.aicpa-cima.com/resources/... #ConsolidationAccounting #NoncontrollingInterest #AdvancedAccounting