Assume that a Parent company acquires a 60% interest in its Subsidiary on January 1, 2020.On the date of acquisition, the fair value of the 60% controlling interest was $1,440,000 and the fair value of the 40% noncontrolling interest was $960,000.On January 1, 2020, the book value of net assets equaled $2,400,000 and the fair value of the identifiable net assets equaled the book value of identifiable net assets (i.e. there was no AAP or Goodwill). The parent uses the equity method to account for its investment in the subsidiary.

On December 31, 2021, the Subsidiary company issued $3,000,000 (face) 5 percent, five-year bonds to an unaffiliated company for $2,760,436.The bonds pay interest annually on December 31, and the bond discount is amortized using the straight-line method.This results in annual bond-payable discount amortization equal to $47,913 per year.

On December 31, 2023, the Parent paid $3,081,698 to purchase all of the outstanding Subsidiary company bonds.The bond premium is amortized using the straight-line method, which results in annual bond-investment premium amortization equal to $27,233 per year.

The Parent and the Subsidiary report the following financial statements for the year ended December 31, 2024:

Income Statement

Income Statement

Parent Subsidiary

Sales $1,100,000 $800,000

Cost of goods sold -440,000 -450,000

Gross Profit 660,000 350,000

Income (loss) from subsidiary 91,398

Bond interest income 122,767

Bond interest expense -197,913

Operating expenses -230,000 -125,000

Net income $644,165 $27,087

Statement of Retained Earnings

Parent Subsidiary

BOY Retained Earnings $4,000,000 $450,000

Net income 644,165 27,087

Dividends -200,000 -25,000

EOY Retained Earnings $4,444,165 $452,087

Balance Sheet

Parent Subsidiary

Assets:

Cash $1,750,000 $800,000

Accounts receivable 800,000 750,000

Inventory 1,200,000 250,000

Equity Investment 1,289,761

Investment in bonds 3,054,465

PPE, net 12,806,046 6,392,262

$20,900,272 $8,192,262

Liabilities and Stockholders' Equity:

Accounts payable $1,600,000 $838,000

Current Liabilities 2,200,000 1,100,000

Bonds payable 2,904,174

Long-term Liabilities 2,226,100 950,000

Common Stock 1,162,000 398,000

APIC 9,268,007 1,550,000

Retained Earnings 4,444,165 452,087

$20,900,272 $8,192,262

Required:

Provide the consolidation entries and a consolidation worksheet for the year ended December 31, 2022