Assume that a parent company acquired a subsidiary on January 1, 2012 for $847,000. The purchase price was $314,000 in excess of the book value of the subsidiary's Stockholders' Equity on the acquisition date. On the acquisition date, the subsidiary's stockholders equity was comprised of $390,000 of no-par common stock and $143,000 of retained earnings. The Acquisition Accounting Premium (AAP) was assigned as follows: an increase of $18,000 in accounts receivable that were entirely collected during the year after acquisition, an increase of $65,000 for property, plant and equipment that has 10 years of remaining useful life, $109,000 for an unrecorded patent with an 8-year remaining life and $122,000 for goodwill. All amortizable components of the AAP are amortized using the straight-line method. On January 1, 2014, the parent sold Equipment to the subsidiary for a cash price of $133,200. The parent had acquired the equipment at a cost of $129,300 and depreciated the equipment over its 12-year useful life using the straight-line method (no salvage value). The parent had depreciated the equipment for 2 years at the time of sale. The subsidiary retained the depreciation policy of the parent and depreciates the equipment over its remaining 10-year useful life. Following are financial statements of the parent and its subsidiary as of December 31, 2016. The parent uses the cost method of pre-consolidation investment bookkeeping. Parent Subsidiary Parent Subsidiary Income statement Balance sheet Sales $1,300,000 $598,000 Assets Cost of goods sold (715,000) (364,000) Cash $117,000 $78,000 Gross profit 585,000 234,000 Accounts receivable 156,000 117,000 Deprec. & amort. Expense (39,000) (26,000) Inventory 364,000 182,000 Operating expenses (390,000) (104,000) Equity investment 847,000 Interest expense (19,500) (6,500) Property, plant & equipment 442,000 312,000 Total expenses (448,500) (136,500) Other assets 169,000 286,000 Income (loss) from subsidiary 45,500 Total assets 2,095,000 $975,000 Net income $182,000 $97,500 Liabilities and stockholders' equity Accounts payable $325,000 $70,200 Statement of retained earnings Accrued liabilities 32,500 59,800 BOY retained earnings $715,000 $325,000 Notes payable 195,000 78,000 Net income 182,000 97,500 Common stock 795,000 390,000 Dividends (149,500) (45,500) Retained earnings 747,500 377,000 Ending retained earnings $747,500 $377,000 Total liabilities and equity 2,095,000 $975,000 e. Prepare the consolidation entries for the year ended December 31, 2016. Consolidation Journal Description Debit Credit [AD] 0 0 0 0 [C] 0 0 0 0 [E] BOY Common stock (Subsidiary) 0 0 0 0 0 0 [A] 0 0 PPE, net Patent 0 0 0 0 + 0 0 [D] 0 0 0 0 Patent 0 0 0 [lgain) 0 0 0 [ldep] 0 0 0 0 f. Prepare the consolidation spreadsheet for the year ended December 31, 2016. Use negative signs with your answers in the Consolidated column for: Cost of goods sold, all expenses (inc. Total expenses) and Dividends. Consolidation Worksheet Parent Subsidiary Debit Credit Consolidated Income statement Sales $1,300,000 $598,000 $ 0 Cost of goods sold (715,000) (364,000) 0 Gross profit 585,000 234,000 0 Deprec. & amort. expense (39,000) (26,000) [D] 0 0 [ldep] 0 Operating expenses (390,000) (104,000) 0 Interest expense (19,500) (6,500) 0 Total Expenses (448,500) (136,500) 0 Income (loss) from subsidiary 45,500 [C] 0 0 Net income $182,000 $97,500 $ 0 Retained earnings statement: BOY retained earnings $715,000 $325,000 [E] 0 0 [AD]] $ 0 Net income 182,000 97,500 0 Dividends (149,500) (45,500) 0 [C] 0 Ending retained earnings $747,500 $377,000 $ 0 $ 0 Balance sheet: Assets Cash Accounts receivable Inventory Equity investment $117,000 156,000 $78,000 117,000 182,000 0 0 364,000 847,000 0 0 0 [AD]] [lgain) [A] [ldep] 0 [E] 0 [A] 0 [D] o [Igain) PPE, net 442,000 312,000 0 0 0 Other assets 169,000 286,000 0 Patent 0 0 [D] 0 [A] [A] Goodwill 0 0 2,095,000 $975,000 $ 0 $ 0 0 Total assets Liabilities & stockholders' equity Accounts payable Accrued liabilities Notes payable Common stock EOY Retained earnings Total liabilities and equity 0 $325,000 32,500 195,000 795,000 747,500 $2,095,000 $70,200 59,800 78,000 390,000 377,000 $975,000 [E] 0 0 0 $ 0 $ $ 0 $ 0 Please answer all parts of the question. Assume that a parent company acquired a subsidiary on January 1, 2012 for $847,000. The purchase price was $314,000 in excess of the book value of the subsidiary's Stockholders' Equity on the acquisition date. On the acquisition date, the subsidiary's stockholders equity was comprised of $390,000 of no-par common stock and $143,000 of retained earnings. The Acquisition Accounting Premium (AAP) was assigned as follows: an increase of $18,000 in accounts receivable that were entirely collected during the year after acquisition, an increase of $65,000 for property, plant and equipment that has 10 years of remaining useful life, $109,000 for an unrecorded patent with an 8-year remaining life and $122,000 for goodwill. All amortizable components of the AAP are amortized using the straight-line method. On January 1, 2014, the parent sold Equipment to the subsidiary for a cash price of $133,200. The parent had acquired the equipment at a cost of $129,300 and depreciated the equipment over its 12-year useful life using the straight-line method (no salvage value). The parent had depreciated the equipment for 2 years at the time of sale. The subsidiary retained the depreciation policy of the parent and depreciates the equipment over its remaining 10-year useful life. Following are financial statements of the parent and its subsidiary as of December 31, 2016. The parent uses the cost method of pre-consolidation investment bookkeeping. Parent Subsidiary Parent Subsidiary Income statement Balance sheet Sales $1,300,000 $598,000 Assets Cost of goods sold (715,000) (364,000) Cash $117,000 $78,000 Gross profit 585,000 234,000 Accounts receivable 156,000 117,000 Deprec. & amort. Expense (39,000) (26,000) Inventory 364,000 182,000 Operating expenses (390,000) (104,000) Equity investment 847,000 Interest expense (19,500) (6,500) Property, plant & equipment 442,000 312,000 Total expenses (448,500) (136,500) Other assets 169,000 286,000 Income (loss) from subsidiary 45,500 Total assets 2,095,000 $975,000 Net income $182,000 $97,500 Liabilities and stockholders' equity Accounts payable $325,000 $70,200 Statement of retained earnings Accrued liabilities 32,500 59,800 BOY retained earnings $715,000 $325,000 Notes payable 195,000 78,000 Net income 182,000 97,500 Common stock 795,000 390,000 Dividends (149,500) (45,500) Retained earnings 747,500 377,000 Ending retained earnings $747,500 $377,000 Total liabilities and equity 2,095,000 $975,000 e. Prepare the consolidation entries for the year ended December 31, 2016. Consolidation Journal Description Debit Credit [AD] 0 0 0 0 [C] 0 0 0 0 [E] BOY Common stock (Subsidiary) 0 0 0 0 0 0 [A] 0 0 PPE, net Patent 0 0 0 0 + 0 0 [D] 0 0 0 0 Patent 0 0 0 [lgain) 0 0 0 [ldep] 0 0 0 0 f. Prepare the consolidation spreadsheet for the year ended December 31, 2016. Use negative signs with your answers in the Consolidated column for: Cost of goods sold, all expenses (inc. Total expenses) and Dividends. Consolidation Worksheet Parent Subsidiary Debit Credit Consolidated Income statement Sales $1,300,000 $598,000 $ 0 Cost of goods sold (715,000) (364,000) 0 Gross profit 585,000 234,000 0 Deprec. & amort. expense (39,000) (26,000) [D] 0 0 [ldep] 0 Operating expenses (390,000) (104,000) 0 Interest expense (19,500) (6,500) 0 Total Expenses (448,500) (136,500) 0 Income (loss) from subsidiary 45,500 [C] 0 0 Net income $182,000 $97,500 $ 0 Retained earnings statement: BOY retained earnings $715,000 $325,000 [E] 0 0 [AD]] $ 0 Net income 182,000 97,500 0 Dividends (149,500) (45,500) 0 [C] 0 Ending retained earnings $747,500 $377,000 $ 0 $ 0 Balance sheet: Assets Cash Accounts receivable Inventory Equity investment $117,000 156,000 $78,000 117,000 182,000 0 0 364,000 847,000 0 0 0 [AD]] [lgain) [A] [ldep] 0 [E] 0 [A] 0 [D] o [Igain) PPE, net 442,000 312,000 0 0 0 Other assets 169,000 286,000 0 Patent 0 0 [D] 0 [A] [A] Goodwill 0 0 2,095,000 $975,000 $ 0 $ 0 0 Total assets Liabilities & stockholders' equity Accounts payable Accrued liabilities Notes payable Common stock EOY Retained earnings Total liabilities and equity 0 $325,000 32,500 195,000 795,000 747,500 $2,095,000 $70,200 59,800 78,000 390,000 377,000 $975,000 [E] 0 0 0 $ 0 $ $ 0 $ 0 Please answer all parts of the