c. Complete the consolidating entries according to the C-E-A-D-I sequence and complete the consolidation worksheet.

Use negative signs with answers in the Consolidated column for Cost of goods sold, Operating expenses and Dividends.

Consolidation Worksheet
Income statement		Parent		Subsidiary			Debit		Credit			Consolidated
Sales		$3,045,000		$560,000		[Isales]	Answer					Answer
Cost of goods sold		(2,135,000)		(336,000)		[Icogs]	Answer		Answer		[Icogs]	Answer
									Answer		[Isales]
Gross profit		910,000		224,000								Answer
Equity income		10,500		-		[C]	Answer					Answer
Operating expenses		(581,000)		(140,000)		[D]	Answer					Answer
Net income		$339,500		$84,000								Answer
Statement of retained earnings
BOY retained earnings		$1,400,000		$283,500		[E]	Answer		Answer		[ADJ]	Answer
Net income		339,500		84,000								Answer
Dividends		(87,500)		(10,500)					Answer		[C]	Answer
Ending retained earnings		$1,652,000		$357,000								Answer
Balance sheet
Assets
Cash		$455,000		$175,000								Answer
Accounts receivable		392,000		126,000					Answer		[Ipay]	Answer
Inventory		595,000		175,000					Answer		[Icogs]	Answer
Equity investment		560,000		-		[ADJ]	Answer		Answer		[E]	Answer
						[Icogs]	Answer		Answer		[A]
PPE, net		2,800,000		294,000		[A]	Answer		Answer		[D]	Answer
Customer List						[A]	Answer		Answer		[D]	Answer
Royalty Agreement						[A]	Answer		Answer		[D]	Answer
Goodwill						[A]	Answer					Answer
		$4,802,000		$770,000								Answer
Liabilities and equity
Accounts payable		$245,000		$70,000		[Ipay]	Answer					Answer
Other currentliabilities		280,000		87,500								Answer
Long-term liabilities		1,750,000		182,000								Answer
Common stock		490,000		35,000		[E]	Answer					Answer
APIC		385,000		38,500		[E]	Answer					Answer
Retained earnings		1,652,000		357,000			-		-			Answer
		$4,802,000		$770,000			Answer		Answer			Answer

The inventory not remaining at the end of a given year is sold to unaffiliated entities outside of the consolidated group during the next year. The parent uses the cost method of pre-consolidation Equity Investment bookkeeping. The financial statements of the parent and its subsidiary for the year ended December 31, 2019, follow: Parent Subsidiary Parent Subsidiary Income statement Balance sheet Sales $3,045,000 $560,000 Assets Cost of goods sold (2,135,000) (336,000) Cash $455,000 $175,000 Gross profit 910,000 224,000 Accounts receivable 392,000 126,000 Operating expenses (581,000) (140,000) Inventory 595,000 175,000 Income (loss) from subsidiary 10,500 Equity investment 560,000 Net income $339,500 $84,000 Property, plant & equipment 2,800,000 294,000 Statement of retained earnings $4,802,000 $770,000 BOY retained earnings $1,400,000 $283,500 Liabilities and stockholders' equity Net income 339,500 84,000 Accounts payable $245,000 $70,000 Dividends (87,500) (10,500) Other current liabilities 280,000 87,500 Ending retained earnings $1,652,000 $357,000 Long-term liabilities 1,750,000 182,000 Common stock 490,000 35,000 APIC 385,000 38,500 Retained earnings 1,652,000 357,000 $4,802,000 $770,000 Support a. Disaggregate and document the activity for the 100% Acquisition Accounting Premium (AAP) through December 31, 2019. 2016 Year ended December 31, 2017 2018 2019 100% AAP Amortization - Dr (Cr) Property, plant and equipment (PPE), net $ Customer List Royalty Agreement Goodwill Net amortization December 31, 2017 2018 2016 2016 2019 Support Jan. 1 100% Unamortized AAP - Dr (Cr) Property, plant and equipment (PPE), net $140,000 $ Customer List 70,000 Royalty Agreement 56,000 Goodwill 84,000 Net unamortized $350,000 $ b. Compute the amount of the beginning of year [AD]] adjustment necessary for the consolidation of the financial statements for the year ended December 31, 2019. Do not use negative signs with your answers below. Change in RE(S) thru BOY Cumulative AAP amort thru BOY BOY Upstream IIP ADJ Amount Description Debit Credit [AD] [C] [E] BOY Common stock (Subsidiary) BOY APIC (Subsidiary) [A] PPE, net Customer list Royalty Agreement Support Customer List Royalty Agreement [lcogs] To recognize prior year profit on intercompany sales. [lsales] [lcogs] To defer current period profit on intercompany sales. [lpay]