a. Compute the Equity Investment balance as of January 1, 2016 b. Show the computation to yield the $179,150 equity income reported by the parent for the year ended December 31, 2016 Do not use negative signs with your answers Subsidiary net income Less: Amortization Less: Depreciation C. Show the computation to yield the $1,730,550 Equity Investment account balance reported by the parent at December 31, 2016 Do not use negative signs with your answers Equity investment at 1/1/16 Plus: Equity income LessDividends Equity investment at 12/31/16 d. Prepare the consolidation entries for the year ended December 31, 2016 Consolidation Journal Description Debit Credit [C] Equity income Dividends Equity investment E] Common Stock APIC Retained earnings Equity investment A] PPE, net Patent Licenses Goodwill Equity investment [D] Operating expenses PPE, net Patent Licenses e. Prepare the consolidated spreadsheet for the year ended December 31, 2016 Use negative signs with answers in the Consolidated column for Cost of goods sold, Operating expenses Consolidation Worksheet Parent Subsidiary Debit Credit Consolidated Income statement Sales $4,802,000 $1,358,300 Cost of goods sold Gross profit Equity income Operating expenses (3,457,300) (784,700) 1,344,700 573,600 179,150 (720,300) (340,200) DI Net income $803,550 $233,400 Statement of retained earnings BOY retained earnings $1,694,700 $676,200 [E Net income 803,550 233,400 Dividends (414,000) (78,000) $2,084,250 $831,600 Ending retained earnings Balance sheet Assets Cash $719,600 $337,400 Accounts receivable 1,229,200 303,800 Inventory 1,624,000 389,900 Equity investment 1,730,550 IC] PPE, net ID) ID) ID) 2,923,200 721,000 [A] Patent Licenses Goodwill $8,226,550 $1,752,100 Liabilities and equity Accounts payable $702,800 $124,600 Accrued liabilities 835,800 163,100 998,900 Long-term liabilities 00,000 436,100 2,536,100 Common stock 527,10087,500 [E] $ APIC 1,976,600 109,200 [E] Retained earnings 2,084,250 831,600 $8,226,550 $1,752,100 Consolidation several years subsequent to date of acquisition- Equity method Assume that a parent company acquired a subsidiary on January 1, 2014. The purchase price was $865,000 in excess of the subsidiary's book value of Stockholders' Equity on the acquisition date, and that excess was assigned to the following [A] assets Original Original Useful Amount [A] Asset Property, plant and equipment (PPE), net 140,000 16 years Patent License Goodwil Life 245,000 7 years 05,000 10 years 375,000 Indefinite $865,000 The [A] assets with definite useful lives have been depreciated or amortized as part of the parent's preconsolidation equity method accounting. The Goodwill asset has been tested annually for impairment, and has not been found to be impaired. The financial statements of the parent and its subsidiary for the year ended December 31, 2016, are as follows Parent Subsidiary Parent Subsidiary Income statement Sales Cost of goods sold Gross profit Equity income Operating expenses Balance sheet $4,802,000 $1,358,300 Assets (3,457,300) (784,700) Cash $719,600 $337,400 1,229,200 303,800 1,624,000 389,900 1,730,550 2,923,200 721,000 1,344,700 573,600 Accounts receivable 179,150 720,300) 40,200) Equity investment 803,550 $233,400 Property, plant & equipment Inventory Net income $8,226,550 $1,752,100 Statement of retained earnings BOY retained earnings Net income Dividends 1,694,700 676,200 iabilities and stockholders' equity 803,550 233,400 Accounts payable 414,000) (78,000) Accrued liabilities 2,084,250 $831,600 Long-term liabilities $702,800 $124,600 835,800 163,100 2,100,000 436,100 87,500 1,976,600 109,200 2,084,250 831,600 $8,226,550 $1,752,100 Ending retained earnings Common stock APIC Retained earnings 527,100 a. Compute the Equity Investment balance as of January 1, 2016 b. Show the computation to yield the $179,150 equity income reported by the parent for the year ended December 31, 2016 Do not use negative signs with your answers Subsidiary net income Less: Amortization Less: Depreciation C. Show the computation to yield the $1,730,550 Equity Investment account balance reported by the parent at December 31, 2016 Do not use negative signs with your answers Equity investment at 1/1/16 Plus: Equity income LessDividends Equity investment at 12/31/16 d. Prepare the consolidation entries for the year ended December 31, 2016 Consolidation Journal Description Debit Credit [C] Equity income Dividends Equity investment E] Common Stock APIC Retained earnings Equity investment A] PPE, net Patent Licenses Goodwill Equity investment [D] Operating expenses PPE, net Patent Licenses e. Prepare the consolidated spreadsheet for the year ended December 31, 2016 Use negative signs with answers in the Consolidated column for Cost of goods sold, Operating expenses Consolidation Worksheet Parent Subsidiary Debit Credit Consolidated Income statement Sales $4,802,000 $1,358,300 Cost of goods sold Gross profit Equity income Operating expenses (3,457,300) (784,700) 1,344,700 573,600 179,150 (720,300) (340,200) DI Net income $803,550 $233,400 Statement of retained earnings BOY retained earnings $1,694,700 $676,200 [E Net income 803,550 233,400 Dividends (414,000) (78,000) $2,084,250 $831,600 Ending retained earnings Balance sheet Assets Cash $719,600 $337,400 Accounts receivable 1,229,200 303,800 Inventory 1,624,000 389,900 Equity investment 1,730,550 IC] PPE, net ID) ID) ID) 2,923,200 721,000 [A] Patent Licenses Goodwill $8,226,550 $1,752,100 Liabilities and equity Accounts payable $702,800 $124,600 Accrued liabilities 835,800 163,100 998,900 Long-term liabilities 00,000 436,100 2,536,100 Common stock 527,10087,500 [E] $ APIC 1,976,600 109,200 [E] Retained earnings 2,084,250 831,600 $8,226,550 $1,752,100 Consolidation several years subsequent to date of acquisition- Equity method Assume that a parent company acquired a subsidiary on January 1, 2014. The purchase price was $865,000 in excess of the subsidiary's book value of Stockholders' Equity on the acquisition date, and that excess was assigned to the following [A] assets Original Original Useful Amount [A] Asset Property, plant and equipment (PPE), net 140,000 16 years Patent License Goodwil Life 245,000 7 years 05,000 10 years 375,000 Indefinite $865,000 The [A] assets with definite useful lives have been depreciated or amortized as part of the parent's preconsolidation equity method accounting. The Goodwill asset has been tested annually for impairment, and has not been found to be impaired. The financial statements of the parent and its subsidiary for the year ended December 31, 2016, are as follows Parent Subsidiary Parent Subsidiary Income statement Sales Cost of goods sold Gross profit Equity income Operating expenses Balance sheet $4,802,000 $1,358,300 Assets (3,457,300) (784,700) Cash $719,600 $337,400 1,229,200 303,800 1,624,000 389,900 1,730,550 2,923,200 721,000 1,344,700 573,600 Accounts receivable 179,150 720,300) 40,200) Equity investment 803,550 $233,400 Property, plant & equipment Inventory Net income $8,226,550 $1,752,100 Statement of retained earnings BOY retained earnings Net income Dividends 1,694,700 676,200 iabilities and stockholders' equity 803,550 233,400 Accounts payable 414,000) (78,000) Accrued liabilities 2,084,250 $831,600 Long-term liabilities $702,800 $124,600 835,800 163,100 2,100,000 436,100 87,500 1,976,600 109,200 2,084,250 831,600 $8,226,550 $1,752,100 Ending retained earnings Common stock APIC Retained earnings 527,100