Assume that, on January 1, 2007, a parent company acquired an 80% interest in its subsidiary. The total fair value of the controlling and noncontrolling interests was $550,000 over the book value of the subsidiary's Stockholders' Equity on the acquisition date, the parent assigned the excess to the following (A) assets: Initial Fair Value Useful Life (years) [A] Asset Patent 10 $300,000 250,000 Goodwill Indefinite $550,000 80% of the Goodwill is allocated to the parent. Assume that the subsidiary sells inventory to the parent (upstream) which includes that inventory in products that it ultimately sells to customers outside of the controlled group. You have compiled the following data as of 2012 and 2013: 2012 2013 Transfer price for inventory sale $674,000 $733,000 (615,000 (653,000 Cost of goods sold Gross profit $59.000 $80,000 35% 25% % inventory remaining Gross profit deferred EOY receivable/payable $14,750 $28,000 $93,000 $105,000 The inventory not remaining at the end of the year has been sold outside of the controlled group. The parent and the subsidiary report the following financial statements at December 31, 2013: Parent Subsidiary Parent Subsidiar Income statement: Sales Balance sheet: Assets $6,770,000 $2,521,500 (4,739,000)|(1,511,100) Cost of goods sold Cash $798,240 S699,785 1.010.400 Gross profit Equity income 2,031,000 249,872 (1.242,600) Accounts receivable Inventory 866,560 1,313,380 1,849,065 584,292 750,513 (654,810) Operating expenses Equity investment $1,038,272 355,590 6,317,764 1,388,533 Net income Property, plant and equipment (PPE), net $11,145,009 $3,423,123 Statement of retained earnings: BOY retained earnings $3,401,248 $1,301,225 Net income 1,038,272 355,590 (199,210) (35,259) Dividends Liabilities and stockholders' equity Current liabilities $972,849 $584,292 Long-term liabilities 4,000,000 839,500 $4.240,310 $1,621,556 EOY retained earnings Common stock 1,106,895 167,900 APIC 824,955 4.240,310 209.875 1,621,556 Retained earnings $11,145,009 $3,423,123 Required: a. Compute the EOY Noncontrolling Interests b. Prepare the Consolidation Entries Answer: a. Required: a. Compute the EOY Noncontrolling Interests b. Prepare the Consolidation Entries Answer: . a. b. [C] Equity income Consol. Ni attributable to NCI Dividends Equity investment Noncontrolling interest Eliminates the change in the investment account of AAP adjusted changes in SE(S). [E] Common stock (S) - @BOY APIC (S) - @BOY Retained earnings (S) @BOY Equity investment - @BOY Noncontrolling interest (@BOY) Eliminates the beginning balance in SE(S) by eliminating the BV portion of the beginning investment account. [A] PPE, net - @BOY (100% AAP) Patent, net @BOY (100% AAP) GW @ BOY (100% AAP) Equity investment - @BOY (AAP) Noncontrolling interest Allocates beginning-of-year 100% AAP to the controlling and noncontrolling interests by eliminating the remaining investment account and establishing the BOY AAP for nci%. [D] Operating expenses (for 100% AAP amort.) PPE, net (for 100% AAP amort) Patent, net (for 100% AAP amort) Recognition of dep and amort of AAP assets. [cogsEquity investment Noncontrolling interest @ BOY Cost of goods sold Recognition of deferred gain on inventory sale and proration between parent and subsidiary. [les Sales Cost of goods sold Elimination of 100% of all intercompany transactions. [lcogs.Cost of goods sold Inventory Deferral of gross profit on this year inventory sales. [l sales Accounts payable Accounts receivable Elimination of intercompany receivable and payable