Financing Statement

Finance a la shmoop what is a consolidated income statement? alright

people put it together consolidated combined and yeah put [Rabbit appears in a cage]

together imagine that..well think of a consolidated income statement as a

mash-up of the income statements of two merging companies sort of like you know [Company merges into another]

when Rihanna met Eminem and there was that monster thing under the bed Reese's

Pieces thing you know peanut butter and chocolate and they mashed up and they

were awesome yeah together all right well yeah well only in this case we have

a consolidated income statement accounting is never that exciting we

have two drink company's lemonade stands are us being mashed up or consolidated [Boy stood at a lemonade stand]

with harmonic and peaceful make like a mint and leave yeah that's their

competitor so let's look at them line by line side by side and go through the

process of consolidation note the first line here as we compare the hindsight [Lemonade stand company balance sheets appear]

year of 2020 where lemonade stands our US had 20,000 units of lemonade sold and

make like a mint and leave had 10,000 units of tea sold so 30,000 if we were

reporting a consolidated income statement under the new company called

Le-mint-ade stands are us sorry we could stretch for that then yeah we'd report

30,000 total drink units sold and yes the number would be a bit more vague

because it wouldn't necessarily state what was lemonade and what was tea and

doing solid accounting separately we would probably break out those numbers

as separate line items if we were actually really good and no you cannot [Lemonade poured into a barrel]

pour them together and just make them one big fat Arnold Palmer sorry so now

go down to the revenues line alright the gross revenues from lemonade of 20,000

would simply be added to the gross revenues of 8,000 bucks for a mint

to show consolidated income statement revenues of $28,000 with net revenues of

19,000 plus 7,000 there or 26,000 using advanced calculus to find these numbers

now go down to the expenses area alright this mashup is well less elegant [Expenses section highlighted on balance sheet]

in it we don't have apples to apples consolidation like we do in the revenues

category where dollars map cleanly to dollars on the

expences lines well tea comprises different elements than lemonade so and

we've got some stretching to do we still have dollars but they're attributed to

different kinds of costs in the merged Mint company we have new line items like

pots and soil and greenhouse rent none of which are items in our lemonade

stand business because in the mint tea business we grow our own stuff that's [Person give thumbs up at tea plants]

kind of cool right so more than likely good accounting would simply itemize

each of these elements producing a detailed and granular income statement

that would eventually well basically add one side with the other noting the

pre-tax profits of eight thousand bucks from lemonade combining with sixteen

hundred dollars of profits for a mint for total pre-tax profits of 9600

dollars is it likely that the combined company finds what are called synergies

that is with more volume of product being ordered and/or more volume of [Definition of synergies appears on 100 dollar bill]

advertisements being placed might the merged company benefit from volume

discounts? sure what about cross promotion from lemonade drinkers to tea

drinkers sure what about the cost of accountants who used to separately

prepare each statement for taxes now combining efforts likely at relatively

cheaper prices per dollar earned? yes they negotiate with accountants like us

and get a better price all right well the gist is that when you consolidate an

income statement you're usually merging with or acquiring

a competitor or supplier in an analogous business space and most of the time good [Boy and girl cheering at a lemonade stand with stacks of cash]

things happen so yeah now that you know how to consolidate an income statement

you can well you know get busy..