Assume that on Janurary 1, 2014 a parent company acquired 70% interest in its subsidiary for a purchase price that was $125,00 over the book value of the subsidiary;s stockholders equity on the acquisition date. The parent allocated the excess to the following asset PPE, Initial fair value 125,000, useful life years 20.

Assume that the parent sells inventory to the subsidiary(downstream) which includes the inventory in products that it ultimately sells to customers outside of the controlled grouo. You have complied the following data as of 2015, 2016

Tranfer price for inventory sale 97280 13340

Cost of goods sold (72,789) ( 105,400)

Gross profit 24500 28000

% inventory remaining 25 % 35%

Gross profit deferred 6125 9800

EOY receivable/payable 10000 150000

The inventory not remaining at the end of the year has been sold outside the controlled group.

The parent and the subsidiary report the follwoing statements at December 31, 2016

Income Statement

Parent Subsidiary

Sales 5,430,000 638,650

Cost of goods sold (3,801,000) (300,150)

Gross profit 1,629,000 338,500

Equity investment 137,855

Operating expenses (1,031,700) (130,065)

Net income 735,155 208, 435

Statement of retained earnings

BOY Retained earnings 2728,032 258, 463

Net income 735,155 208,435

Dividends (136,291) (7004)

EOY Retained earnings 3,326,896 459,894

Balance sheet

Cash 607,551 276,803

Accounts receivable 695, 040 116,058

Inventory 1,053, 420 149, 075

Equity investment 434, 652

PPE net 5,067,276 275, 805

7,857,939 7,857,939

Current liabilities 780. 291 116,058

Longterm liabilities 2,203, 202 116, 750

Common Stock 887,805 33,350

APIC 659,745 41,688

Retained earning 3,326,896 459,894

7,857,939 817,740

Required

Compute the EOY Equity Investment balance of $434,652( 4 years subsequent to the acquisition)

b) Compute the EOY noncontrolling intereest equity balance

c) Prepare the consolidation spreadsheet.

d) Prepare the consolidation journal entries( CEADI entries)