Assume that a parent company acquires an 70% interest in its subsidiary for a purchase price of $1,078,000. The excess of the total fair value of the controlling and noncontrolling interests over the book value of the subsidiary's Stockholders' Equity is assigned to a building (in PPE, net) that is worth $100,000 more than its book value, an unrecorded patent that the parent valued at $200,000, and Goodwill of $300,000. There is no control premium, so goodwill is assigned proportionally to the controlling and noncontrolling interests. The parent and the subsidiary report the following pre-consolidation balance sheets on the acquisition date: Parent Subsidiary Parent Subsidiary Cash $920,000 $215,000 Current liabilities $810,000 $330,000 Accounts receivable 782,000 330,000 Lont-term liabilities 4,000,000 500,000 Inventory 1,100,000 425,000 Common stock 920,000 90,000 Equity investment 1,078,000 APIC 700,000 120,000 Property, plant, and equipment(PPE), net 5,400,000 800,000 Retained earnings 2,850,000 730.000 Total assets $9,280,000 1,770,000 Total liabilities and equity $9,280,000 $1,770,000 a. Prepare the consolidation entries on the acquisition date. Credit Consolidation Worksheet Description Debit [E] Common stock APIC Equity investment [A] PPE, net Patent Equity investment b. Prepare the consolidation spreadsheet on the acquisition date. Elimination Entries Dr Cr Parent Consolidated Subsidiary $215,000 Cash $920,000 $ Accounts receivable 782,000 330,000 1,100,000 425,000 Inventory Equity investment 1,078,000 [E] [A] PPE, net 5,400,000 800,000 [A] Patent [A] Goodwill [A] Total Assets $ Current liabilities $ Long-term liabilities Common stock $9,280,000 $1,770,000 $810,000 $330,000 4,000,000 500,000 920,000 90,000 [E] 700,000 120,000 [E] APIC Noncontrolling interest [E] [A] Retained earnings 2,850,000 730,000 [E] Total Liabilities and Equity $9,280,000 $1,770,000 $