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a. Show the computation to yield the pre-consolidation $67,837 Income (loss) from sub reported by the parent during 2016 b. Show the computation to yield
a. Show the computation to yield the pre-consolidation $67,837 Income (loss) from sub reported by the parent during 2016
b. Show the computation to yield the Equity Investment balance of $957,989 reported by the parent at Dec 31, 2016
c. Prepare the consolidation entries for the year ended Dec 31, 2016
d. Prepare the consolidation spreadsheet for the year ended Dec 31, 2016
20. Consolidation spreadsheet for continuous sale of inventory-Equity method Assume that a parent company acquired a subsidiary on January 1, 2013. The purchase price was $500.000 in excess of the subsidiary's book value of Stockholders' Equity on the acquisition date, and that excess was assigned to the following AAP assets: AAP Asset Original Amount Original Useful Life Property, plant and equipment (PPE), net .. Customer list Royalty agreement. Goodwill. $100,000 175,000 125,000 100,000 $500,000 20 years 10 years 10 years indefinite The AAP assets with a definite useful life have been amortized as part of the parent's equity metod accounting. The Goodwill asset has been tested annually for impairment, and has not been found to be impaired. Assume that the parent company sells inventory to its wholly owned subsidiary. The subsidiary, ultimately, sells the inventory to customers outside of the consolidated group. You have compiled the following data for the years ending 2015 and 2016: Inventory Sales Gross Profit Remaining in Unsold Inventory Receivable (Payable) 2016...... 2015... $68,000 $43,700 $19,380 $12,597 $27,200 $13,237 The inventory not remaining at the end of the year has been sold to unaffiliated entities outside of the consolidated group. The parent uses the equity method to account for its Equity Investment. The financial statements of the parent and its subsidiary for the year ended December 31, 2016, follow: Parent Subsidiary Parent Subsidiary Income statement: Sales. Cost of goods sold............ Gross profit. ... Income (loss) from subsidiary...... Operating expenses.... Vet income... $783,000 (469,800) 313,200 $4,370,000 (3,059,000) 1,311,000 67,837 (830,300) $ 548,537 Balance sheet: Assets Cash.... Accounts receivable. Inventory. PPE, net . . . . . . . Equity investment.. $ 650,639 559,360 847,780 4,078,084 957,989 $ 253,087 181,656 233,334 431,694 (203,580) $109,620 $7,093,852 $1,099,771 Statement of retained earnings: BOY retained earnings ... et income. Dividends.. EOY retained earnings ...... $2,195,488 548,537 (126,164) $2,617,861 $404,550 109,620 (14,251) $499,919 Liabilities and stockholders' equity Accounts payable. Other current liabilities . . . . . . . . . . Long-term liabilities ....... Common stock APIC Retained earnings ..... $ 327,313 403,228 2,500,000 714,495 530,955 2,617,861 $7,093,852 $ 93,459 127,943 261,000 52,200 65,250 499,919 $1,099,771Step by Step Solution
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