Page 590 - Accounting Principles (A Business Perspective)

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a. Brown believes that consolidated financial statements can be prepared simply by adding together the amounts
in the two individual columns. Is this correct? If not, why not?
b. Prepare a consolidated balance sheet for the date of acquisition without preparing a consolidated statement

work sheet.
Business decision case C International Flavors & Fragrances, Inc., is the leading creator and manufacturer of
flavors and fragrances used by others to impart or improve flavor or fragrance in a wide variety of consumer
products.
Use the following excerpt from International Flavors & Fragrances Inc.'s 2000 annual report to calculate the
dividend yield on common stock and the payout ratios. Then comment on the results.
2000 1999 1998
Earnings per share $1.22 $1.53 $1.90
Dividends per share ($) 1.29 1.52 1.48
Stock price per common share ($) 20.31 37.63 44.19
Group project D In teams of two or three students, select three companies you believe may be profitable
short-term investments. Determine the current market prices for those companies' stocks from today's newspaper
and the market prices six months ago. Calculate the gain or loss that your team would have recorded if it had
purchased 500 shares of each company's stock six months ago and sold all of the shares today. Write a short memo
to your instructor describing why you selected those companies and why you believe the market prices of their

stocks increased or decreased. Also, be prepared to describe your analysis to the class.
Group project E With one or two other students, go to the library and locate Statement of Financial
Standards No. 94, "Consolidation of All Majority-Owned Subsidiaries", published by the Financial Accounting
Standard Board. In a report to your instructor answer questions such as: What does the standard require? Why did
the FASB act on this topic? Why are "nonhomogeneous" subsidiaries included in the consolidated group? Why did
one of the Board members dissent from the statement? Describe some of the important background on this topic as
given in the statement.
Group project F In a small group of students, locate the annual reports of three companies with investments
in other companies. Compare the accounting and reporting for the investments by the three companies. For

instance, by reading the notes to the financial statements, try to determine whether they account for the
investments using the cost or equity methods. Is there goodwill on the balance sheets? What else can you determine
about the investments? Write a report to your instructor summarizing your findings.
Using the Internet—A view of the real world

Visit the following website for General Electric Company:
http://www.ge.com
Pursue choices on the screen until you locate the consolidated statement of financial position. You will probably
go down some "false paths" to get to this financial statement, but you can get there. This experience is all part of
learning to use the Internet. Check to see if there is a minority interest listed on the consolidated statement of
financial position. Check out the notes to the financial statements for further information. Browse around the site
for any other interesting information concerning the company. Write a memo to your instructor summarizing your
findings.

Answers to self-test
True-false

Accounting Principles: A Business Perspective 591 A Global Text