Journal for Equity Method

[Former Member]

P owns 30% of S1. (using equity method)

Investment = 30.000 USD

Equity of S1 = 25.000 USD

S1 owns 70% of S2. (using purchase method)

Investment cost = 50.000 USD

Equity of S2 = 30.000

What is the journal of first consolidation in group S1 and group P?

[dan_sullivan · Accepted solution]

There is no elimination of investment and equity for equity held companies. Therefore, assuming S1 is a child group of P, the only entries are:

Cons group S1:

investment -50

equity +30

goodwill +15

minority interest liability -10

minority interest equity +10

Cons group P: is the opposite entry to reverse S1 entry so that S1 is accounted for with equity method.

[Former Member · Accepted solution]

I believe it should be as follow , right?

Cons group S1:

investment -50

equity +30

goodwill +10

minority interest liability -10

Anyway, thanks for your clarification. I also think in the same way. But my system provide wrong journal entry. It provides as follow for Cons group S1 :

Equity 30

MI equity -30

and there is no journal entry for cons group P.

Do you have any clue on this?

Thanks.

[dan_sullivan · Accepted solution]

Actually goodwill should be 29 (50 -(30 *70%))

Have you checked the accounting technique assignment for the cons group view for cons group P to make sure it is equity and not purchase? In accounting technique, click on P and then change the view to cons group. Here the method should be equity.

[Former Member · Accepted solution]

Yes, goodwill should be 29 and MI -9.

I have assign the correct method to the cons group and the result still wrong.

Is there any other configuration (except the assignment of accounting technique) that will trigger this wrong journal?

[Former Member · Accepted solution]

anyway Dan, Are sure that the journal should be like as we discuss?

Because I try in the IDES system, the system also provide the wrong journal.

[Former Member · Accepted solution]

you're right Dan.

Thanks a lot.