| Course | ACC-6020 Advanced Accounting |
|---|---|
| Module | Module 3 |
| Paper type | Written Assignment 3: consolidated financial statements |
| Length | About 763 words, 5 pages |
| Format | APA 7 student paper |
| School | Thomas Edison State University |
| Program | M.S. in Management in Accounting |
| Updated | October 2026 |
Free sample paper for ACC 6020 Module 3
One Year Later: Consolidating Ridgewood and Lakeland and Measuring the Noncontrolling Interest
Student Name
M.S. in Management in Accounting, Thomas Edison State University
ACC-6020: Advanced Accounting
Mentor Name
Month Day, Year
One Year Later: Consolidating Ridgewood and Lakeland and Measuring the Noncontrolling Interest
Introduction
A parent and its subsidiary keep separate books, but users want to see them as one economic entity. Consolidation adds their accounts together and eliminates the parent's investment against the subsidiary's equity, replacing it with the subsidiary's assets and liabilities at their acquisition-date fair values, less amortization since (Jeter & Chaney, 2011). Because Ridgewood owns 80%, the 20% owned by others appears as a noncontrolling interest in equity.
Because Ridgewood keeps its investment on the equity method, there is a built-in check: once the eliminations are posted, group retained earnings must match Ridgewood's own, since its books already hold its slice of Lakeland's adjusted profit.
Lakeland's First Year
During 2026 Lakeland reported net income of $900,000 on its own books and paid dividends of $200,000. The fair value step-ups from Module 2 produce extra expense in consolidated income.
Goodwill is not amortized, so it does not appear in the adjustment. The minority owners bear part of the amortization because their stake went on the books at fair value, step-ups and goodwill included.
| Adjusted subsidiary income, 2026 | Amount |
|---|---|
| Lakeland's reported net income | $900,000 |
| Inventory step-up, sold during the year | (150,000) |
| Depreciation of buildings and equipment step-up | (60,000) |
| Amortization of patents | (100,000) |
| Amortization of customer relationships | (50,000) |
| Adjusted subsidiary income | $540,000 |
| Ridgewood's 80% share | 432,000 |
| Noncontrolling interest's 20% share | 108,000 |
The Equity Method on Ridgewood's Books
Ridgewood records 80 percent of Lakeland's adjusted income, $432,000, as investment income and reduces the investment by its $160,000 share of dividends, so the account moves from $6,400,000 to $6,672,000. Because the parent's books already carry its share of Lakeland's adjusted income, the equity method and consolidation give Ridgewood the same net income; consolidation changes the presentation, not the parent's share.
| Investment in Lakeland | Amount |
|---|---|
| Cost, January 1 | $6,400,000 |
| Equity in Lakeland's adjusted income | 432,000 |
| Dividends received: 80% of $200,000 | (160,000) |
| Balance, December 31 | $6,672,000 |
The Worksheet Eliminations
The second and third rows together form one entry: debits of $3,700,000 to Lakeland's equity and $4,300,000 to the step-ups and goodwill equal credits of $6,400,000 to the investment and $1,600,000 to the noncontrolling interest. After the eliminations, no investment account remains, and Lakeland's assets appear at fair value less amortization.
The eliminations never touch either company's books. They exist only on the consolidation worksheet, so each year's worksheet must rebuild the step-ups from the acquisition date, less the amortization recorded since, before the current year's entries are made. Keeping a schedule of the remaining step-ups by asset is the practical way to prevent errors as years pass.
| Entry | Debit | Credit |
|---|---|---|
| Reverse the year's equity method entries | Equity in Lakeland income 432,000 | Dividends declared 160,000; Investment in Lakeland 272,000 |
| Entry S: parent's investment against subsidiary equity | Dr Common stock 1,000,000; Dr Retained earnings 2,700,000 | Cr Investment in Lakeland 6,400,000; Cr Noncontrolling interest 1,600,000 |
| Re-create the step-ups at acquisition | Inventory 150,000; Land 300,000; Buildings and equipment 600,000; Patents 700,000; Customer relationships 450,000; Goodwill 2,100,000 | (balances the entry above, totaling $4,300,000) |
| Amortize the step-ups for 2026 | Cost of goods sold 150,000; Depreciation expense 60,000; Amortization expense 150,000 | Inventory 150,000; Accumulated depreciation 60,000; Patents 100,000; Customer relationships 50,000 |
| Record the noncontrolling interest's share of income and dividends | Noncontrolling interest in income 108,000 | Dividends declared 40,000; Noncontrolling interest 68,000 |
Consolidated Results
Ridgewood's own net income for 2026, excluding its equity in Lakeland, was $2,500,000, which already reflects the $250,000 of acquisition expense.
The noncontrolling interest's balance in consolidated equity rises from $1,600,000 to $1,668,000: its share of adjusted income, $108,000, less its share of dividends, $40,000. It is reported in equity, separately from Ridgewood's shareholders' equity, and consolidated net income is presented before allocation to the two groups (Financial Accounting Standards Board [FASB], 2007). Because Ridgewood used the full equity method, its own net income of $2,932,000 equals the consolidated income attributable to its shareholders, a useful check on the eliminations.
Consolidated net income is therefore $3,040,000, Ridgewood's own $2,500,000 plus Lakeland's adjusted $540,000. The income statement attributes $108,000 to the noncontrolling interest and $2,932,000 to Ridgewood's shareholders, showing both amounts on its face as Statement No. 160 requires, and the noncontrolling interest appears within equity rather than between liabilities and equity. Moeller et al. (2005) found that acquiring firms' shareholders lost very large sums around big acquisition announcements, a reminder that the goodwill booked here is a bet the acquirer still has to win.
| Consolidated income, 2026 | Amount |
|---|---|
| Ridgewood's separate income | $2,500,000 |
| Lakeland's adjusted income | 540,000 |
| Consolidated net income | 3,040,000 |
| Attributable to the noncontrolling interest | (108,000) |
| Attributable to Ridgewood's shareholders | $2,932,000 |
References
Financial Accounting Standards Board. (2007). Noncontrolling interests in consolidated financial statements (Statement of Financial Accounting Standards No. 160).
Jeter, D. C., & Chaney, P. K. (2011). Advanced accounting (5th ed.). John Wiley & Sons.
Moeller, S. B., Schlingemann, F. P., & Stulz, R. M. (2005). Wealth destruction on a massive scale? A study of acquiring-firm returns in the recent merger wave. The Journal of Finance, 60(2), 757-782. https://doi.org/10.1111/j.1540-6261.2005.00745.x
Reading the ACC 6020 Module 3 assignment instructions
Consolidated statements are the subject of Written Assignment 3 in Module 3. The set has you keep Ridgewood's books on the equity method, post worksheet entries on the deal date and a year later, write off the step-ups, split income and equity with the minority owners and lay out the consolidated statements. Jeter and Chaney's chapters show several worksheet formats, so follow the one your mentor uses. The case figures are fictional; they continue the invented acquisition, with figures from the first two assignments. Most prompts also ask for the noncontrolling interest's share of income on the face of the consolidated statement, so keep that figure visible in the worksheet.
How the ACC 6020 Module 3 example is put together
The introduction explains what consolidation does and why a noncontrolling interest appears. The first table adjusts the subsidiary's income for amortization and splits it between owners, with an explanation of why both bear the step-ups. A second table carries the parent's equity method investment through the year. A table lists each elimination, and the paragraph beneath it proves the entries net to zero. The final section computes consolidated net income and its attribution, moves the noncontrolling interest's balance forward and confirms the eliminations with the full equity method check.
ACC 6020 Module 3 rubric: what earns full marks
Consolidation worksheets like this one count within the half of the grade earned through written work. For consolidation, mentors check that subsidiary income is adjusted for step-up amortization before it is divided, that the equity method balance is correct, that eliminations remove the investment and the subsidiary's equity completely, that step-ups and goodwill are re-created and amortized and that consolidated net income is attributed correctly between controlling and noncontrolling interests. A check such as the parent's income equaling the controlling share of consolidated income demonstrates mastery and helps the mentor follow the work. A worksheet whose eliminations are labeled and whose totals balance earns most of the credit. Explaining how the noncontrolling interest's share of the step-up amortization is computed earns credit.
ACC 6020 Module 3 help from the desk
Consolidation errors usually come from mixing the parent's share with the whole. A fair-value minority stake means the step-ups belong to the whole company, so both owners carry the amortization. Another frequent error is eliminating ending rather than beginning equity in the year-end entry. Reverse the parent's equity method entries before eliminating the investment. Label each worksheet entry with a letter and a short purpose so the reader can follow the elimination sequence. Check that consolidated equity equals the parent's equity plus the noncontrolling interest after every entry; a difference points straight to the error. Run the step-up write-offs for each year since the purchase, not just the latest. A free first sample of your own ACC-6020 Module 3 problems is available on request.
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ACC 6020 Module 3 questions, answered
Where can I find a free ACC 6020 Module 3 sample paper?
The first-year consolidation of Ridgewood and Lakeland is worked above: adjusted subsidiary income, the equity method balance, worksheet eliminations and consolidated income with the noncontrolling interest.
How is noncontrolling interest in income calculated?
The noncontrolling ownership percentage times the subsidiary's income adjusted for amortization of fair value step-ups and other consolidation adjustments.
Where is the noncontrolling interest reported?
In consolidated equity, separately from the parent's shareholders' equity, with consolidated net income allocated between the two.
Why are fair value step-ups amortized in consolidation?
Depreciable and amortizable assets were recorded at fair value at acquisition, so the excess over book value is expensed over their remaining lives in consolidated income.
What check confirms consolidation eliminations under the equity method?
The parent's net income under the full equity method should equal consolidated net income attributable to the parent.