Question

Gamma, Inc., owns Cleopatra Corp. The two companies individual balance sheets are below. Requirements 1. Prepare a consolidated balance sheet of Gamma, Inc. It is sufficient to complete the consol 2. What is the amount of stockholders' equity for the consolidated entity? k sheet. Requirement 1. Prepare a consolidated balance sheet of Gamma, Inc. It is sufficient to complete the consolidation work sheet Let's prepare the consolidation work sheet for Gamma, Inc. Begin by recording the elimination entries and then complete the consolidation work sheet. (If a box is not used in the work sheet, leave the box empty, do not enter a zero.) Gamma, Inc.
Consolidation Work Sheet
		Cleopatra	Elimination
	Gamma, Inc.	Corp.	Debit	Credit
Cash	$51,000	$20,000
Accounts receivable, net	85,000	57,000
Note receivable from Gamma		45,000
Inventory	60,000	78,000
Plant assets, net	288,000	90,000
Investment in Cleopatra	105,000
Other assets	28,000	9,000
Total	$617,000	$299,000
Accounts payable	$43,000	$21,000
Notes payable	149,000	37,000
Other liabilities	82,000	136,000
Common stock	114,000	77,000
Retained earnings	229,000	28,000
Total	$617,000	$299,000

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Answer 1

1) Consolidated balance sheet of Gamma Inc. There are two adjustment that are need in the scenario

i) Notes receivable from Gamma $45,000- here it will be eliminated from Cleopatra corp Assets i.e Notes receivable account and then the Notes payable of Gamma Inc.

ii) Investment in Cleopatra $105,000- Since Cleopatra is a 100% subsidiary of Gamma Inc, hence the investment represent the common stock and retained earning of Cleopatra which is eliminated in the below presentation.

Assets	Gamma Inc	Cleopatra corp	elimination Dr	elimination cr	Total
Cash	$51,000	$20,000			$71,000
Accounts Receivable,net	85,000	57,000			$142,000
notes receivable from Gamma		45,000		45,000
Inventory	68,000	70,000			138,000
Plant assets, net	288,000	90,000			378,000
investment in Cleopatra	105,000			105,000
Other Assets	28,000	9,000			37,000
TOTAL	$617,000	$299,000		150,000	766,000

Liabilities	Gamma Inc	Cleopatra Corp	elimination Dr	elimination Cr	Total
Accounts Payable	$43,000	$21,000			64,000
Notes Payable	$149,000	$37,000	$45,000		$141,000
Other Liabilities	82,000	136,000			$218,000
Common stock	114,000	77,000	$77,000		$114,000
Retained earning	229,000	28,000	$28,000		$229,000
Total	$617,000	$299,000	$150,000		766,000

2) Shareholder equity= Share capital + Retained earning- treasury shares

= $114,000+ $229,000

= $343,000

In consolidated balance sheet the share capital and retained earning of subsidiary entity is eliminated. hence in the above we can see shareholder equity of Gamma Inc only.

Please let me know if you need any further clarification.