24. Parent Industries bought Subsidiary Inc.'s voting stock on January 1, 2019 for $42,000, when Subsidiary's book value was $8,000. Fair value information on Subsidiary's assets and liabilities at the date of acquisition is as follows: . . . Property and equipment (PRE) is overvalued by $7,000. P&E has a 10-year remaining life, straight-line. Previously unreported identifiable intangibles are valued at $8,000. These intangibles have indefinite lives, but testing reveals impairment of $2,000 in 2019 and $1,000 impairment in 2020. Goodwill reported for this acquisition is not impaired in 2019, but is impaired by $3,000 in 2020. Parent uses the complete equity method to account for its investment in Subsidiary on its own books. It is now December 31, 2020, two years since the acquisition. The consolidation working paper at December 31, 2020, with the separate trial balances of Parent and Subsidiary is attached to this exam. Prepare a schedule calculating the initial value of goodwill for this acquisition. Show your work in detail. b. Calculate Parent's equity in net income of Subsidiary for 2020. Show your work in detail. c. Using the attached consolidation working paper, prepare the required entries to prepare consolidated financial statements at December 31, 2020. 24. Parent Industries bought Subsidiary Inc.'s voting stock on January 1, 2019 for $42,000, when Subsidiary's book value was $8,000. Fair value information on Subsidiary's assets and liabilities at the date of acquisition is as follows: Property and equipment (P&E) is overvalued by $7,000. P&E has a 10-year remaining life, straight-line. Previously unreported identifiable intangibles are valued at $8,000. These intangibles have indefinite lives, but testing reveals impairment of $2,000 in 2019 and $1,000 impairment in 2020. Goodwill reported for this acquisition is not impaired in 2019, but is impaired by $3,000 in 2020. Parent uses the complete equity method to account for its investment in Subsidiary on its own books. It is now December 31, 2020, two years since the acquisition. The consolidation working paper at December 31, 2020, with the separate trial balances of Parent and Subsidiary is attached to this exam. Prepare a schedule calculating the initial value of goodwill for this acquisition. Show your work in detail. b. Calculate Parent's equity in net income of Subsidiary for 2020. Show your work in detail. c. Using the attached consolidation working paper, prepare the required entries to prepare consolidated financial statements at December 31, 2020. Adjustments Cowolidated Credis No. 24 Consolidating Workpaper Subsidiary Credil Credu Dahir Parent Credit D 15,000 10.000 Current Assets 90,000 63,000 Property & Fquipment, net Identifiable Intangibles 44.900 Investment in Subsidiary Goodwill 57.500 76,200 Liabilities 5.000 40,000 Capital Stock 6.100 30.000 Retained Earnings, 1/1 100 2.000 Treasury Stock 500 Dividends 50,000 84,000 Sales Revenue 1.700 Equity in Net Income of Subsidiary 30.000 55.000 Cost of Goods Sold 15,000 25,000 118,600 Operating expenses 118,600 231,900 231,900 . Page 17 24. Parent Industries bought Subsidiary Inc.'s voting stock on January 1, 2019 for $42,000, when Subsidiary's book value was $8,000. Fair value information on Subsidiary's assets and liabilities at the date of acquisition is as follows: . . . Property and equipment (PRE) is overvalued by $7,000. P&E has a 10-year remaining life, straight-line. Previously unreported identifiable intangibles are valued at $8,000. These intangibles have indefinite lives, but testing reveals impairment of $2,000 in 2019 and $1,000 impairment in 2020. Goodwill reported for this acquisition is not impaired in 2019, but is impaired by $3,000 in 2020. Parent uses the complete equity method to account for its investment in Subsidiary on its own books. It is now December 31, 2020, two years since the acquisition. The consolidation working paper at December 31, 2020, with the separate trial balances of Parent and Subsidiary is attached to this exam. Prepare a schedule calculating the initial value of goodwill for this acquisition. Show your work in detail. b. Calculate Parent's equity in net income of Subsidiary for 2020. Show your work in detail. c. Using the attached consolidation working paper, prepare the required entries to prepare consolidated financial statements at December 31, 2020. 24. Parent Industries bought Subsidiary Inc.'s voting stock on January 1, 2019 for $42,000, when Subsidiary's book value was $8,000. Fair value information on Subsidiary's assets and liabilities at the date of acquisition is as follows: Property and equipment (P&E) is overvalued by $7,000. P&E has a 10-year remaining life, straight-line. Previously unreported identifiable intangibles are valued at $8,000. These intangibles have indefinite lives, but testing reveals impairment of $2,000 in 2019 and $1,000 impairment in 2020. Goodwill reported for this acquisition is not impaired in 2019, but is impaired by $3,000 in 2020. Parent uses the complete equity method to account for its investment in Subsidiary on its own books. It is now December 31, 2020, two years since the acquisition. The consolidation working paper at December 31, 2020, with the separate trial balances of Parent and Subsidiary is attached to this exam. Prepare a schedule calculating the initial value of goodwill for this acquisition. Show your work in detail. b. Calculate Parent's equity in net income of Subsidiary for 2020. Show your work in detail. c. Using the attached consolidation working paper, prepare the required entries to prepare consolidated financial statements at December 31, 2020. Adjustments Cowolidated Credis No. 24 Consolidating Workpaper Subsidiary Credil Credu Dahir Parent Credit D 15,000 10.000 Current Assets 90,000 63,000 Property & Fquipment, net Identifiable Intangibles 44.900 Investment in Subsidiary Goodwill 57.500 76,200 Liabilities 5.000 40,000 Capital Stock 6.100 30.000 Retained Earnings, 1/1 100 2.000 Treasury Stock 500 Dividends 50,000 84,000 Sales Revenue 1.700 Equity in Net Income of Subsidiary 30.000 55.000 Cost of Goods Sold 15,000 25,000 118,600 Operating expenses 118,600 231,900 231,900 . Page 17