A finished ACC-656 Topic 4 elimination entry worksheet example, posting each elimination for a wholly owned subsidiary with its reason and proving the investment account eliminates to zero. Searches like "acc 656 topic 4 assignment example", "acc656 topic 4 sample" and "acc-656 topic 4 example" land here.
What a finished ACC-656 Topic 4 elimination entry worksheet looks like
The finished worksheet sets the parent's and subsidiary's trial balances in adjacent columns, then two elimination columns, then the consolidated figures, all amounts illustrative. The parent paid $1,000,000 when the subsidiary's book value was $800,000, and the $200,000 excess went $120,000 to equipment with six years of remaining life and $80,000 to goodwill. During the year the subsidiary earned $150,000 and paid $40,000 in dividends, and the parent, using the equity method, carries its investment at $1,090,000. Six entries follow, each with a line of explanation: the subsidiary's opening equity removed, the excess allocated, equity income and dividends reversed, a year of extra depreciation of $20,000 recorded, and $60,000 of intercompany management fees, $35,000 still unpaid, canceled. After posting, the investment column reads zero and consolidated net income matches what the parent already reports.
How an ACC-656 Topic 4 example is structured
Each elimination is set out in the same three lines, so the worksheet can be audited entry by entry. The worksheet opens with the acquisition facts and the allocation schedule that produced the excess, since every later entry depends on that schedule. The trial balances follow, with the parent's investment account and equity income highlighted as the items that must disappear. The eliminations come third, lettered in the convention many advanced texts use, each giving the debit, the credit and a sentence on why the group does not report that amount. A fourth part posts them and extends the consolidated column. The fifth part proves the work: the investment account nets to zero, consolidated net income equals the parent's equity-method income, and the balance sheet balances. A closing note explains how the entries would change in year two, when opening retained earnings already reflect a year of adjustments.
The allocation schedule placed first
Every figure the eliminations use, from the $120,000 equipment step-up to the $80,000 of goodwill, is traced to the acquisition-date allocation shown at the top.
Each entry given its reason
Beneath every debit and credit sits a sentence stating why the combined group would not report that balance, which is the reasoning a reviewer checks first.
Equity income reversed, not added twice
The parent's $130,000 of equity income is removed so the subsidiary's revenues and expenses can appear line by line without counting the same profit twice.
Intercompany fees canceled in both statements
The $60,000 of management fees leaves revenue and expense together, and the $35,000 unpaid balance leaves receivables and payables, since the group cannot owe itself.
Three proofs after posting
The investment account at zero, net income matching the parent's equity-method figure and a balance sheet that balances together show the worksheet is complete.
Where marks go in ACC-656 Topic 4
On this topic a worksheet that balances can still lose heavily, because markers are reading the eliminations rather than the totals. Consolidating by adding the two trial balances and removing only the investment account leaves intercompany fees in revenue and the receivable in current assets. Eliminating the subsidiary's current-year ending equity, instead of its opening equity, double counts the year's income and forces an unexplained plug somewhere. Papers that record the fair value step-up but forget the extra depreciation it causes overstate consolidated income every year the equipment lasts. Entries posted with no explanation, however accurate, leave the reviewer unable to tell understanding from pattern-matching, and many rubrics weight the explanation heavily. A worksheet with no proof at the end, especially no check that the investment account reached zero, gives no assurance that anything was eliminated completely.
Get an ACC-656 Topic 4 example written to your instructions
Send your ACC-656 Topic 4 instructions, the rubric and the parent and subsidiary trial balances your section provided. We write a custom example to them, with the acquisition allocation shown, each elimination posted with its reason, intercompany balances removed and the worksheet proved at the end, back in 24 to 48 hours. The first one is free.
ACC-656 Topic 4 questions, answered
Why eliminate the subsidiary's opening equity rather than its ending equity?
Because the current year's income is already on the worksheet, line by line, in the subsidiary's revenue and expense columns. Eliminating ending equity would remove that income a second time through retained earnings. Removing opening equity, together with the parent's equity income and the subsidiary's dividends, clears the investment account while leaving the year's operations to flow into the consolidated figures.
Does the parent's accounting method change the eliminations?
It changes the entries, not the consolidated result. A parent using the equity method has already recorded its share of income and the excess depreciation, so the worksheet reverses those. A parent using the initial value or cost method has not, so the worksheet must first convert the investment and retained earnings. Either way the consolidated statements come out identical, and the example states which method it assumes.
What letters do the elimination entries use?
Many advanced accounting texts label them by purpose, for example S for the subsidiary's stockholders' equity, A for the allocation of the excess, I for intercompany income, D for dividends, E for excess amortization and P for payables. Conventions differ between books. The example adopts the lettering of your assigned textbook, and where the instructions specify none it describes each entry by purpose.