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Assume a parent company acquired 100% of a subsidiary January 1, 2020. The purchase price was $140,000 in excess of the subsidiarys book value of

Assume a parent company acquired 100% of a subsidiary January 1, 2020. The purchase price was $140,000 in excess of the subsidiarys book value of Stockholders Equity on the acquisition date, and that excess was assigned entirely to an unrecorded Patent owned by the subsidiary. The assumed economic useful life of the Patent is 5 years. Assume the wholly owned subsidiary sells inventory to the parent. The parent, ultimately, sells the inventory to customers outside of the consolidated group. You have compiled the following data for the years ending 2021 and 2022:

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 2022 follow:

Requirements:

a. Show the computation to yield the pre-consolidation $106,400 Income (loss) from subsidiary reported by the parent during 2022.

b. Prepare the consolidation spreadsheet for the year ended December 31, 2022.

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