Assume that a parent company acquired 100% of a subsidiary on 1/1/X1. The purchase price was $175,000 in excess of the subsidiary's book value of net assets on acquisition date and the excess was assigned entirely to an unrecorded patent. The life of the patent is 10 years.

Assume the subsidiary sells inventory to the parent. The parent ultimately sells the inventory to outside customers. The following relates to the years X2 and X3:

-	Inventory Sales	GP of unsold inventory	Receivable (Payable)
X3	$103,300	$29,441	$41,320
X2	$87,900	$19,137	$27,986

Prepare the consolidated financial statements at 12/31/X3 by placing the appropriate entries in their respective debit/credit column cells.

Indicate, in the blank column cell to the left of the debit and credit column cells if the entry is a [C], [E], [A], [D] or [I]entry.

2 3 4 Income Statement: 5 Sales 6 7 Cost of goods sold 8 Gross profit 9 Equity income 10 Operating expenses 11 Net income 12 13 Statement of Retained Earnings: 14 BOY retained earnings 15 Net income. 16 Dividends 17 EOY retained earnings 18 19 Balance Sheet: 20 Assets 21 Cash 22 Accounts receivable 23 Inventory 24 Building, net 25 Patent 26 Equity investment 27 28 29 30 Liabilities & stockholders' equity 31 Accounts payable 32 Other current liabilities 33 Long-term liabilities 34 Common stock 35 APIC 36 Retained earnings 37 38 B Parent 8,220,000 (5,754,000) 2,466,000 189,126 (1,561,800) 1,093,326 4,129,728 1,093,326 (251,465) 4,971,589 555,910 1,052,160 1,594,680 7,670,904 1,314,788 12,188,442 615,678 758,475 3,500,000 1,343,970 998,730 4,971,589 12,188,442 C Subsidiary 1,549,500 (929,700) 619,800 0 (402,870) 216,930 800,575 216,930 (28,201) 989,304 500,842 359,484 461,751 854,291 0 2,176,368 184,948 253,191 516,500 103,300 129,125 989,304 2,176,368 D F Consolidation Entries E Dr 0 G Cr 0 H Consolidated 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0