Consolidating business operations seattle dating online
Regardless of the method of acquisition; direct costs, costs of issuing securities and indirect costs are treated as follows: Treatment to the acquiring company: When purchasing the net assets the acquiring company records in its books the receipt of the net assets and the disbursement of cash, the creation of a liability or the issuance of stock as a form of payment for the transfer.Treatment to the acquired company: The acquired company records in its books the elimination of its net assets and the receipt of cash, receivables or investment in the acquiring company (if what was received from the transfer included common stock from the purchasing company).The company does not need any entries to adjust this account balance unless the investment is considered impaired or there are liquidating dividends, both of which reduce the investment account.Liquidating dividends : Liquidating dividends occur when there is an excess of dividends declared over earnings of the acquired company since the date of acquisition.The result is one set of financial statements that reflect the financial results of the consolidated entity. horizontal integration:is the combination of firms in the same business lines and markets. vertical integration: is the combination of firms with operations in different but successive stages of production or distribution or both. Conglomeration: is the combination of firms with unrelated and diverse products or services functions, or both.The business environment is in a constant state of flux.The purchasing company uses the cost method to account for this type of investment.Under the cost method, the investment is recorded at cost at the time of purchase.
The parent company needs to issue consolidated financial statements at the end of the year to reflect this relationship.
If the acquired company is liquidated then the company needs an additional entry to distribute the remaining assets to its shareholders.
Treatment to the purchasing company: When the purchasing company acquires the subsidiary through the purchase of its common stock, it records in its books the investment in the acquired company and the disbursement of the payment for the stock acquired.
When the amount of stock purchased is between 20% and 50% of the common stock outstanding, the purchasing company’s influence over the acquired company is often significant.
The deciding factor, however, is significant influence.
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The taxation term of consolidation refers to the treatment of a group of companies and other entities as one entity for tax purposes.