Assume a parent company acquired a subsidiary on January 1, 2020. The purchase price was $1,148,000 in excess of the subsidiarys book value of Stockholders Equity on the acquisition date, and that excess was assigned to the following [A] assets:

[A] Asset								Original Amount			Original Useful Life
Property, plant and equipment (PPE), net								$336,000			12	years
Patent								336,000			8	years
License								224,000			10	years
Goodwill								252,000			Indefinite
								$1,148,000

	Parent	Subsidiary			Parent	Subsidiary
Income statement				Balance sheet
Sales	$6,720,000	$1,820,000		Assets
Cost of goods sold	(4,900,000)	(1,083,600)		Cash	$1,008,000	$462,000
Gross profit	1,820,000	736,400		Accounts receivable	1,582,000	392,000
Equity income	168,000	-		Inventory	2,030,000	700,000
Operating expenses	(1,008,000)	(476,000)		Equity investment	2,520,000	-
Net income	$980,000	$260,400		Property, plant & equipment, net	4,060,000	1,092,000
Statement of retained earnings					$11,200,000	$2,646,000
BOY retained earnings	2,240,000	952,000		Liabilities and stockholders' equity
Net income	980,000	260,400		Accounts payable	$1,064,000	$170,800
Dividends	(504,000)	(50,400)		Accrued liabilities	1,176,000	224,000
Ending retained earnings	$2,716,000	$1,162,000		Long-term liabilities	3,010,000	602,000
				Common stock	854,000	266,000
				APIC	2,380,000	221,200
				Retained earnings	2,716,000	1,162,000
					$11,200,000	$2,646,000

a. Compute the Equity Investment balance as of January 1, 2022.

$Answer

b. Show the computation to yield the $168,000 equity income reported by the parent for the year ended December 31, 2022.

Do not use negative signs with your answers.

Subsidiary net income
Less: Amortization
Less: Depreciation

c. Show the computation to yield the $2,520,000 Equity Investment account balance reported by the parent at December 31, 2022.

		Answer
	Answer
	Answer	Answer
		Answer

d. Prepare the consolidation entries for the year ended December 31, 2022.

Consolidation Journal
	Description	Debit	Credit
[C]
[E]
[A]
[D]

e. Prepare the consolidated spreadsheet for the year ended December 31, 2022.

Use negative signs with answers in the Consolidated column for Cost of goods sold, Operating expenses and Dividends.

Consolidation Worksheet
	Parent	Subsidiary			Debit	Credit		Consolidated
Income statement
Sales	$6,720,000	$1,820,000						Answer
Cost of goods sold	(4,900,000)	(1,083,600)						Answer
Gross profit	1,820,000	736,400						Answer
Equity income	168,000	-		[C]	Answer			Answer
Operating expenses	(1,008,000)	(476,000)		[D]	Answer			Answer
Net income	$980,000	$260,400						Answer
Statement of retained earnings
BOY retained earnings	$2,240,000	$952,000		[E]	Answer			Answer
Net income	980,000	260,400						Answer
Dividends	(504,000)	(50,400)				Answer	[C]	Answer
Ending retained earnings	$2,716,000	$1,162,000						Answer
Balance sheet
Assets
Cash	$1,008,000	$462,000						Answer
Accounts receivable	1,582,000	392,000						Answer
Inventory	2,030,000	700,000						Answer
Equity investment	2,520,000	-				Answer	[C]	Answer
						Answer	[E]
						Answer	[A]
PPE, net	4,060,000	1,092,000		[A]	Answer	Answer	[D]	Answer
Patent				[A]	Answer	Answer	[D]	Answer
Licenses				[A]	Answer	Answer	[D]	Answer
Goodwill	-	-		[A]	Answer			Answer
	$11,200,000	$2,646,000						Answer
Liabilities and equity
Accounts payable	$1,064,000	$170,800						Answer
Accrued liabilities	1,176,000	224,000						Answer
Long-term liabilities	3,010,000	602,000						Answer
Common stock	854,000	266,000		[E]	Answer			Answer
APIC	2,380,000	221,200		[E]	Answer Mark 0.00 out of 1.00			Answer
Retained earnings	2,716,000	1,162,000			-	-		Answer
	$11,200,000	$2,646,000			Answer	Answer		Answer