Assume a parent company acquires its subsidiary by paying $1,300,000 for all of the outstanding voting shares of the investee. On the acquisition date, subsidiary's assets and liabilities have individual fair values that equal their book values, except for property equipment with a fair value greater than book value by $150,000 and license with a fair value greater than book value by $250,000. The parent and subsidiary have the following balance sheets immediately after the acquisition, but before any pushdown adjustments by the subsidiary: Parent Subsidiary Assets: Cash & receivables Inventory Property & equipment, net Equity investment Licenses Liabilities and stockholders' equity: Current liabilities Other liabilities Note payable Common stock APIC Retained earnings Description Property & equipment, net Licenses Goodwill $ 800,000 $150,000 600,000 200,000 2,300,000 825,000 1,300,000 Pushdown equity 75,000 $5,000,000 $1,100,000 a. Compute the amount of goodwill implicit in the acquisition of the subsidiary. $ 250,000 + + + x + X $ 400,000 $ 200,000 300,000 b. Assume the subsidiary elects to apply pushdown accounting immediately after the above financial statements were prepared. Provide the journal entries required for the subsidiary to apply pushdown accounting. 400,000 1,670,000 100,000 1,430,000 200,000 1,200,000 350,000 $5,000,000 $1,250,000 Debit 150,000 250,000 250,000 0 0 x 0 Credit 0 0 0 650,000 0 0 x c. Prepare the consolidation entry or entries on the date of acquisition, assuming the subsidiary applied pushdown accounting. Debit Credit 100,000 200,000 250,000 * Description [E] Common stock APIC Pushdown equity Equity investment Assets: Cash & receivables d. Prepare the consolidated balance sheet on the date of acquisition. Consolidated Balance Sheet Inventory Property & equipment, net Licenses Goodwill + + + Other liabilities Note payable Common stock APIC Retained earnings $ 950,000 800,000 3,275,000 325,000 250,000 5,600,000 $ Liabilities and stockholders' equity: Current liabilities $ 0 0 0 550,000 * 600,000 300,000 400,000 1,670,000 1,430,000 1,200,000 $ 5,600,000