Assume that a parent company acquires its subsidiary on 1/1/xx by exchanging 40,000 shares of its $1 par value common stock, with a market value on acquisition date of $28 per share, for all of the outstanding voting shares of the subsidiary. You have been charged with preparing the consolidation of these two entities at the end of the first year. On acquisition date (1/1/xx), all of the subsidiarys assets and liabilities had fair values equaling their book values. Using the data in the attached spreadsheet, complete the consolidation worksheet for 12/31/xx by: Entering the consolidation entries in the appropriate columns for the elimination entries [E], and the change entries [C] associated with the activity for the first year of acquisition. Preparing the consolidated balance sheet as it would appear after acquisition.

Module 2-Option2 Consolidation Entries Parent Subsidiary Dr Cr Consolidated Income statement Sales Cost of goods sold Gross profit Equity income Operating expenses Net income 2,960,000 2,072,000 888,000 235,200 562,400 560,800 1,680,000 1,008,000 672,000 436,800 235,200 Statement of retained earnings BOY retained earnings Net income Dividends Ending retained earnings 1,881,600 560,800 112,160 2,330,240 868,000 235,200 35,280 1,067,920 Balance sheet Assets Cash Accounts receivable Inventory Equity investment 701,920 378,880 574,240 1,319,920 432,880 389,760 500,640 PPE, net 2,170,240 926,240 5,145,200 2,249,520 Liabilities and Stockholders' Equity Accounts payable Accrued liabilities Long-term liabilities Common stock APIC Retained earnings 216,640 257,520 414,400 1,926,400 2,330,240 5,145,200 160,160 209,440 560,000 112,000 140,000 1,067,920 2,249,520