Angela Corporation (a private company) acquired all of the outstanding voting stock of Eddy Tech, Inc., on January 1, 2018, in exchange for $9,000,000 in cash. At the acquisition date, Eddy Tech's stockholders' equity was $7,200,000 including retained earnings of $3,000,000. At the acquisition date, Angela prepared the following fair value allocation schedule for its newly acquired subsidiary:
Consideration transferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $9,000,000
Eddy's stockholder's equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7,200,000
Excess fair over book value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,800,000
To patented technology (5-year remaining life) . . . . . . . . . . . $ 150,000
To trade names (indefinite remaining life) . . . . . . . . . . . . . . . . 500,000
To equipment (8-year remaining life) . . . . . . . . . . . . . . . . . . . . 50,000 . . . . . . 700,000
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$1,100,000
At the end of 2018, Angela and Eddy Tech report the following amounts from their individually maintained account balances, before consideration of their parent-subsidiary relationship. Parentheses indicate a credit balance.
____________________________________________ Angela _______________ Eddy Tech
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,850,000) . . . . . . . . . . . . . (2,400,000)
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,200,000 . . . . . . . . . . . . . . .1,300,000
Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . 425,000 . . . . . . . . . . . . . . . . . 48,000
Amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . .250,000 . . . . . . . . . . . . . . . . . 12,000
Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . .75,000 . . . . . . . . . . . . . . . . . . 53,750
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,900,000) . . . . . . . . . . . . . . . (986,250)
Required:
Prepare a 2018 consolidated income statement for Angela and its subsidiary Eddy Tech. Assume that Angela, as a private company, elects to amortize goodwill over a 10-year period?