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4. On January 1, 2017, Parent Corp. paid $1,710,000 cash to acquire 90% of the outstanding common stock of Sub Inc. Sub Inc. book value
4. On January 1, 2017, Parent Corp. paid $1,710,000 cash to acquire 90% of the outstanding common stock of Sub Inc. Sub Inc. book value was only $725,000 at the time. The recorded as of Sub Inc. were fairly valued at the date of the acquisition. However, Parent determined that Suu Inc. had developed a customer base with a fair value of $800,000 that was not reflected in the recorded assets. The customer base had a 10-year remaining life for amortization purposes. Following are the individual financial records for these two companies. December 31,2018 Accounts Parent Sub Cost of goods sold Depreciation expense Amortzabon expense Interest expense Equity in Sub Income Separate company net income (1,843,000 .100,000 125,000 275,000 27,500 (675,000) 322,000 120,000 11,000 7,000 (437,000) (215,000 Retained Eanings 1/1 Net Income Dividends pad Retained Eamings 12/31 (395,000 (215,000 25,000 85,000) 2,625,000) (437,000) 2712000) Current Asses Investment in Sub Buildings and Equipment 1204,000 1854,000 931,000 430,000 863,000 Total Assels 939.000 1.400,000 Accounts Pasble Notes Paysble Common Sock Additional Paid-in Capital Retained Eamings 1231 Total Liab. and SE 485,000) (542.000 (900,000 (300,000 (200,000) (155,000 (400 60,000) (585,000) 4,939,000) 1,400 The trial balances for each company are also presented in the attached worksheet a. Prepare the Schedule as of January 1, 2017. (3 pts) b. Prepare the consolidation worksheet for this business combination as of December 31. 2012, using the worksheet attached and recording all the worksheet entries, with correct labels, to presen the correct consolidated balances. (20 pts, including correct entries posted) Page 4 of 13
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