Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

50. Consolidation several years subsequent to date of acquisition-Equity method Assume a parent company acquired a subsidiary on January 1, 2017. The purchase price

  

50. Consolidation several years subsequent to date of acquisition-Equity method Assume a parent company acquired a subsidiary on January 1, 2017. The purchase price was $820,000 in excess of the subsidiary's book value of Stockholders' Equity on the acquisition date, and that excess X was assigned to the following [A] assets: LO2 Income statement: Sales. Cost of goods sold Gross profit. Equity income. Operating expenses. Net income [A] Asset Property, plant and equipment (PPE), net Patent. License.. Goodwill a. b. C. The [A] assets with definite useful lives have been depreciated or amortized as part of the parent's pre- consolidation 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, 2019, are as follows: Parent d. e. Subsidiary Statement of retained earnings: Beginning retained earnings... $1,600,000 $ 680,000 186,000 Net income Dividends (36,000) Ending retained earnings.. $4,800,000 $1,300,000 (3,500,000) (774,000) 1,300,000 526,000 120,000 (720,000) $ 700,000 (340,000) $ 186,000 700,000 (360,000) $1,940,000 $830,000 Balance sheet: Assets Cash. Accounts receivable Inventory Equity investment... Property, plant and equipment (PPE), net. Liabilities and stockholders' equity Accounts payable.. Accrued liabilities Original Amount Long-term liabilities. Common stock. APIC. Retained earnings $240,000 240,000 160,000 180,000 $820,000 Parent $ 720,000 1,130,000 1,450,000 1,800,000 2,900,000 $8,000,000 $760,000 840,000 2,150,000 610,000 1,700,000 1,940,000 $8,000,000 Original Useful Life 12 years 8 years 10 years Indefinitel Prepare the consolidation entries for the year ended December 31, 2019. Prepare the consolidation spreadsheet for the year ended December 31, 2019. Subsidiary $ 330,000 280,000 500,000 780,000 $1,890,000 $ 122,000 160,000 430,000 190,000 158,000 830,000 $1,890,000 Compute the Equity Investment balance as of January 1, 2019. Show the computation to yield the $120,000 equity income reported by the parent for the year ended December 31, 2019. Show the computation to yield the $1,800,000 Equity Investment account balance reported by the parent at December 31, 2019.

Step by Step Solution

3.44 Rating (154 Votes )

There are 3 Steps involved in it

Step: 1

Amortization of AAP Asssets Assets PPE Net Patent License Goodwill Total Assets PPE Net Patent Licen... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Federal Taxation 2016 Comprehensive

Authors: Thomas R. Pope, Timothy J. Rupert, Kenneth E. Anderson

29th Edition

134104374, 978-0134104379

More Books

Students also viewed these Accounting questions

Question

What do you think?

Answered: 1 week ago