Prepare consolidation spreadsheet for intercompany sale of equipment --Cost method Assume that a parent company acquired a subsidiary on January 1, 2012 for $862,000. The purchase price was 5329.000 in excess of the book value of the subsidiary's Stockholders' Equity on the acquisition date. On the acquisition date the subsidiary stockholders equity was comprised of $390,000 of no par common stock and 5143,000 of retained earnings. The Acquisition Accounting Premium (AAP) was assigned as follows an increase of $23.000 in accounts receivable that were entirely collected during the year after acquisition, an increase of $65.000 for property, plant and equipment that has 10 years of remaining useful, $114,000 for an unrecorded patent with an 8 year remaining life and 5127.000 for goodwill. All amortizable components of the AAP are amortized using the straight-line method On January 1, 2014, the parent sold Equipment to the subsidiary for a cash price of $131.700 The parent had acquired the equipment at a cost of $127.800 and deprecated the equipment over its 12 year useful life using the straight line method (no salvage values. The parent had depreciated the equipment for 2 years at the time of sale. The subsidiary retained the depreciation policy of the parent and depreciate the equipment over its remaining 10 year useful life Following are financial statements of the parent and its subsidiary as of December 31, 2016. The parent uses the cost method of pre- consolidation investment bookkeeping 72.000 112.000 190.000 Income statement Balance sheet Sales 1.100.000.000 AS Cost of good old . ( 4 4 4 Cnh 5117.000 Gross pro 85.000 20600 Accountable 156.000 Deprecat pene (9.000 26.000 E.000 (1000 2.000 Intere expense co Property planten 42.000 1441 (116.500Oder 160.000 Income dobrom stay 4500 2.110.000 Netcome $10.000 197.500 tis and stockholders equity Accounts payable $325.000 Statement of retained earning Accredits 32.500 BOY naming 175.000 3.000 Notes payable 1000 Net income 180.000 97.500 common stock Davides 1149.500 145.500) Hemed cures Endinerned 1.500 3377.000 Total and 2110,000 112.000 20.000 19.00 $70.200 DO 70.000 390,000 177 000 000 a. Prepare the journal entry that the parent made to record the sale of the equipment to the subsidiary, the journal entry that the subsidiary made to record the purchase, and the entries for the year of sale. Parent Data D Accumulated depreciation Gain on sale of equipment Equipment To record sale of equipment Subsidiary Desc Equipment Cash To record purchase of equipment CODURI Drain Digil Gain on sale of equipment Equipment Accumulated depreciation Dldepl Accumulated depreciation Depreciation expense b. Compute the remaining portion of the deferred gain at January 1, 2016 Prior to preparing consolidated financial statements, compute the amount of equity income the parent would have reported for the year ended December 31, 2016 assuming the parent applied the equity method instead of the cost method of pre-consolidation bookkeeping d. Prior to preparing consolidated financial statements, compute the amount of Equity investment the parent would have reported on December 31, 2016 assuming the parent applied the equity method instead of the cost method of pre-consolidation bookkeeping. Do not use negative signs with your answers below. Equity Investment Cas ir Equity Method) Common Stock (5) EOY Retained Earnings (5) e OY Unamortired AAP OY Deduct Unconfirmed gain OY EOY inwestment (as if equity method) Add: e. Prepare the consolidation entries for the year ended December 31, 2016. Consolidation journal Description Dobi credit [ADI Equity investment BOY Retained earning-Parent 19 Income loss from subsidiary Dividends TE) BOY Common stock (Subsidiary BOY Retained earnings Subsidiary Equity investment FA) PPE, net Patent Goodwill Equity Investment [D) Deprec. & amort. expense PPE, net Patent gain Equity investment PPE.net Ildep) PPE.net Deprec & amort, expense Analarini Prepare consolidation spreadsheet for intercompany sale of equipment-Cost method Assume that a parent company acquired a subsidiary on January 2012 for 5862.000. The purchase price was 5329.000 in excess of the book value of the subsidiary's Stockholders' Equity on the acquisition date. On the wonder the subsidiary's stoholders equity was comprised of $390,000 of no-par common stock and 5143,000 of retained earringt. The Austin Accounting Premium Pwas assigned as follows: an increase of $23,000 in accounts receivable that were entirely collected during the year after acquisition, an increase or 365.000 for property, plant and equipment that has 10 years of remaining useful life 5114.000 for an unrecorded patent with an 8 year remaining life and 5127.000 for goodwill. All amortirable components of the AAP are amortized using the strane method on January 1, 2014, the parent sold Equipment to the subsidiary for a cash price of 131700. The parent had acquired the equipment at cost of 5127,800 and deprecated the equipment over les 12 year useful life using the straight line method (no salvage value). The parent had depreciated the equipment for 2 years at the time of sale. The subsidiary red the depreciation policy of the parent and depreciates the equipment over its remaining 10 year useille Following are financial statements of the parent and its subsidiary as of December 31, 2016. The parent uses the cost method of pre- consolidation investment bookkeeping Income statement Balance sheet Sales 1.100.000.000 Cost of footho (715.000 Grow pro 58.000 200 A 1. Depre amatpere 19.000 2.000 12.00 Opera 30.000 14.000 Interest 119.500 perten Top 1448500 Other Income 500 To 2100 Newcome Accu 10200 Statement of retained earning Aca O neden 571.000.000 74.000 Netcom 120.000 2.500 com Didende (14.500 ning a. Prepare the journal entry that the parent made to record the sale of the open to the subsidiary, the journal entry that the subsidiary made to record the purchase, and the 11entries for the year of sale Parent Cash Accued depreciation Gain on sale of equipment Ent To records of equipment Subsidiary Equipment To recont purchase of lain Gain on sale of equipment Eament Accumulated depreciation ideo) Accumulated depreciation Depreciation perde b. Compute the remaining portion of the deferred gain at January 1, 2016 c. Prior to preparing consolidated financial statements, compute the amount of equity income the parent would have reported for the year ended December 31, 2016 assuming the parent applied the equity method instead of the cost method of pre-consolidation bookkeeping d. Prior to preparing consolidated financial statements, compute the amount of Equity investment the parent would have reported on December 31, 2016 assuming the parent applied the equity method instead of the cost method of pre-consolidation bookkeeping Do not use negative signs with your answers below. Equity investment l'as if Equity Method) Common Stock (5) EOY Retained Earnings (EOY Unamortid MAP OY Deduct: Unconfirmed gain to EO Investment (as ir equity method) Add: le e. Prepare the consolidation entries for the year ended December 31, 2016 Contien Dehli IAD Equity investment BOY Retained earnings Parent Ia Income foss) from subsidiary Dividends E BOY Common stock (Subsidiary BOY Retained earnings Subtidiary Equity investment IA) Patent Goodwill Equity investment ID) Deprec. & amort expense PPE.net Patent Dan Equity inwestment PPL net del PP net Deprec& amort, perse PPE.net WWW . Prepare consolidation spreadsheetlor intercompany sale or equipment Cost method Assume that a parent company acquired a subsidiary on January 1, 2012 for $862,000. The purchase price was $329,000 in excess of the book value of the subsidiary's Stockholders' Equity on the acquisition date. On the acquisition date, the subsidiary's stockholders equity was comprised of $390,000 of no-par common stock and $143,000 of retained earnings. The Acquisition Accounting Premium (AAP) was assigned as follows: an increase of $23,000 in accounts receivable that were entirely collected during the year after acquisition, an increase of $65,000 for property, plant and equipment that has 10 years of remaining useful life, S114,000 for an unrecorded patent with an 8-year remaining life and $127,000 for goodwill . All amortizable components of the AAP are amortized using the straight-line method On January 1, 2014 the parent sold Equipment to the subsidiary for a cash price of $131,700. The parent had acquired the equipment at a cost of S127,800 and depreciated the equipment over its 12-year useful life using the straight-line method (no salvage value). The parent had depreciated the equipment for 2 years at the time of sale. The subsidiary retained the depreciation policy of the parent and depreciates the equipment over its remaining 10- year useful life. Following are financial statements of the parent and its subsidiary as of December 31, 2016. The parent uses the cost method of pre-consolidation investment bookkeeping Parent Subsidiary Parent Subsidiary Income statement Balance sheet Sales $1,300,000 $598,000 Assets Cost of goods sold (715,000) (364,000) Cash $117.000 $78,000 Gross profit 585,000 234,000 Accounts receivable 156,000 117,000 Deprec. & amort Expense (39,000) (26,000) Inventory 364,000 182,000 Operating expenses (390,000) (104.000) Equity investment 862.000 Interest expense (19.500) 6,500) Property, plant & equipment 442,000 312,000 Total expenses (448,500) (136,500) Other assets 169.000 286,000 Income (loss) from subsidiary 45.500 Total assets 2,110,000 $975,000 Net income $182,000 $97.500 Liabilities and stockholders' equity Accounts payable $325.000 $70,200 Statement of retained earnings Accrued liabilities 32 500 59,800 BOY retained earings $715,000 $325,000 Notes payable 195.000 78,000 Net income 182.000 97 500 Common stock 810,000 390,000 Dividends (149 500) (45.500) Retained earnings 377000 Ending retained carings $747,500 $377,000 Total liabilities and equity 2,110,000 $975,000 747 500 Prior to preparing consolidated financial statements compute the amount of equity income the parent would have reported for the year ended December 31, 2016 assuming the parent applied the equity method instead of the cost method of pre-consolidation bookkeeping 0 SAnswer d. Prior to preparing consolidated financial statements, compute the amount of Equity investment the parent would have reported on December 31, 2016 assuming the parent applied the equity method instead of the cost method of pre-consolidation bookkeeping, Do not use negative signs with your answers below. Equity Investment ("as if" Equity Method) 0 Answer Common Stock (S) @ EOY 0 Answer Retained Earnings (S) @ EOY Unamortized AAP @ EOY Answer! 0 Answer Add: Unconfirmed gain @ EOY Answer! 0 Answer Deduct: 0 Answer EOY Investment ("as it equity method) Prepare consolidation spreadsheet for intercompany sale of equipment --Cost method Assume that a parent company acquired a subsidiary on January 1, 2012 for $862,000. The purchase price was 5329.000 in excess of the book value of the subsidiary's Stockholders' Equity on the acquisition date. On the acquisition date the subsidiary stockholders equity was comprised of $390,000 of no par common stock and 5143,000 of retained earnings. The Acquisition Accounting Premium (AAP) was assigned as follows an increase of $23.000 in accounts receivable that were entirely collected during the year after acquisition, an increase of $65.000 for property, plant and equipment that has 10 years of remaining useful, $114,000 for an unrecorded patent with an 8 year remaining life and 5127.000 for goodwill. All amortizable components of the AAP are amortized using the straight-line method On January 1, 2014, the parent sold Equipment to the subsidiary for a cash price of $131.700 The parent had acquired the equipment at a cost of $127.800 and deprecated the equipment over its 12 year useful life using the straight line method (no salvage values. The parent had depreciated the equipment for 2 years at the time of sale. The subsidiary retained the depreciation policy of the parent and depreciate the equipment over its remaining 10 year useful life Following are financial statements of the parent and its subsidiary as of December 31, 2016. The parent uses the cost method of pre- consolidation investment bookkeeping 72.000 112.000 190.000 Income statement Balance sheet Sales 1.100.000.000 AS Cost of good old . ( 4 4 4 Cnh 5117.000 Gross pro 85.000 20600 Accountable 156.000 Deprecat pene (9.000 26.000 E.000 (1000 2.000 Intere expense co Property planten 42.000 1441 (116.500Oder 160.000 Income dobrom stay 4500 2.110.000 Netcome $10.000 197.500 tis and stockholders equity Accounts payable $325.000 Statement of retained earning Accredits 32.500 BOY naming 175.000 3.000 Notes payable 1000 Net income 180.000 97.500 common stock Davides 1149.500 145.500) Hemed cures Endinerned 1.500 3377.000 Total and 2110,000 112.000 20.000 19.00 $70.200 DO 70.000 390,000 177 000 000 a. Prepare the journal entry that the parent made to record the sale of the equipment to the subsidiary, the journal entry that the subsidiary made to record the purchase, and the entries for the year of sale. Parent Data D Accumulated depreciation Gain on sale of equipment Equipment To record sale of equipment Subsidiary Desc Equipment Cash To record purchase of equipment CODURI Drain Digil Gain on sale of equipment Equipment Accumulated depreciation Dldepl Accumulated depreciation Depreciation expense b. Compute the remaining portion of the deferred gain at January 1, 2016 Prior to preparing consolidated financial statements, compute the amount of equity income the parent would have reported for the year ended December 31, 2016 assuming the parent applied the equity method instead of the cost method of pre-consolidation bookkeeping d. Prior to preparing consolidated financial statements, compute the amount of Equity investment the parent would have reported on December 31, 2016 assuming the parent applied the equity method instead of the cost method of pre-consolidation bookkeeping. Do not use negative signs with your answers below. Equity Investment Cas ir Equity Method) Common Stock (5) EOY Retained Earnings (5) e OY Unamortired AAP OY Deduct Unconfirmed gain OY EOY inwestment (as if equity method) Add: e. Prepare the consolidation entries for the year ended December 31, 2016. Consolidation journal Description Dobi credit [ADI Equity investment BOY Retained earning-Parent 19 Income loss from subsidiary Dividends TE) BOY Common stock (Subsidiary BOY Retained earnings Subsidiary Equity investment FA) PPE, net Patent Goodwill Equity Investment [D) Deprec. & amort. expense PPE, net Patent gain Equity investment PPE.net Ildep) PPE.net Deprec & amort, expense Analarini Prepare consolidation spreadsheet for intercompany sale of equipment-Cost method Assume that a parent company acquired a subsidiary on January 2012 for 5862.000. The purchase price was 5329.000 in excess of the book value of the subsidiary's Stockholders' Equity on the acquisition date. On the wonder the subsidiary's stoholders equity was comprised of $390,000 of no-par common stock and 5143,000 of retained earringt. The Austin Accounting Premium Pwas assigned as follows: an increase of $23,000 in accounts receivable that were entirely collected during the year after acquisition, an increase or 365.000 for property, plant and equipment that has 10 years of remaining useful life 5114.000 for an unrecorded patent with an 8 year remaining life and 5127.000 for goodwill. All amortirable components of the AAP are amortized using the strane method on January 1, 2014, the parent sold Equipment to the subsidiary for a cash price of 131700. The parent had acquired the equipment at cost of 5127,800 and deprecated the equipment over les 12 year useful life using the straight line method (no salvage value). The parent had depreciated the equipment for 2 years at the time of sale. The subsidiary red the depreciation policy of the parent and depreciates the equipment over its remaining 10 year useille Following are financial statements of the parent and its subsidiary as of December 31, 2016. The parent uses the cost method of pre- consolidation investment bookkeeping Income statement Balance sheet Sales 1.100.000.000 Cost of footho (715.000 Grow pro 58.000 200 A 1. Depre amatpere 19.000 2.000 12.00 Opera 30.000 14.000 Interest 119.500 perten Top 1448500 Other Income 500 To 2100 Newcome Accu 10200 Statement of retained earning Aca O neden 571.000.000 74.000 Netcom 120.000 2.500 com Didende (14.500 ning a. Prepare the journal entry that the parent made to record the sale of the open to the subsidiary, the journal entry that the subsidiary made to record the purchase, and the 11entries for the year of sale Parent Cash Accued depreciation Gain on sale of equipment Ent To records of equipment Subsidiary Equipment To recont purchase of lain Gain on sale of equipment Eament Accumulated depreciation ideo) Accumulated depreciation Depreciation perde b. Compute the remaining portion of the deferred gain at January 1, 2016 c. Prior to preparing consolidated financial statements, compute the amount of equity income the parent would have reported for the year ended December 31, 2016 assuming the parent applied the equity method instead of the cost method of pre-consolidation bookkeeping d. Prior to preparing consolidated financial statements, compute the amount of Equity investment the parent would have reported on December 31, 2016 assuming the parent applied the equity method instead of the cost method of pre-consolidation bookkeeping Do not use negative signs with your answers below. Equity investment l'as if Equity Method) Common Stock (5) EOY Retained Earnings (EOY Unamortid MAP OY Deduct: Unconfirmed gain to EO Investment (as ir equity method) Add: le e. Prepare the consolidation entries for the year ended December 31, 2016 Contien Dehli IAD Equity investment BOY Retained earnings Parent Ia Income foss) from subsidiary Dividends E BOY Common stock (Subsidiary BOY Retained earnings Subtidiary Equity investment IA) Patent Goodwill Equity investment ID) Deprec. & amort expense PPE.net Patent Dan Equity inwestment PPL net del PP net Deprec& amort, perse PPE.net WWW . Prepare consolidation spreadsheetlor intercompany sale or equipment Cost method Assume that a parent company acquired a subsidiary on January 1, 2012 for $862,000. The purchase price was $329,000 in excess of the book value of the subsidiary's Stockholders' Equity on the acquisition date. On the acquisition date, the subsidiary's stockholders equity was comprised of $390,000 of no-par common stock and $143,000 of retained earnings. The Acquisition Accounting Premium (AAP) was assigned as follows: an increase of $23,000 in accounts receivable that were entirely collected during the year after acquisition, an increase of $65,000 for property, plant and equipment that has 10 years of remaining useful life, S114,000 for an unrecorded patent with an 8-year remaining life and $127,000 for goodwill . All amortizable components of the AAP are amortized using the straight-line method On January 1, 2014 the parent sold Equipment to the subsidiary for a cash price of $131,700. The parent had acquired the equipment at a cost of S127,800 and depreciated the equipment over its 12-year useful life using the straight-line method (no salvage value). The parent had depreciated the equipment for 2 years at the time of sale. The subsidiary retained the depreciation policy of the parent and depreciates the equipment over its remaining 10- year useful life. Following are financial statements of the parent and its subsidiary as of December 31, 2016. The parent uses the cost method of pre-consolidation investment bookkeeping Parent Subsidiary Parent Subsidiary Income statement Balance sheet Sales $1,300,000 $598,000 Assets Cost of goods sold (715,000) (364,000) Cash $117.000 $78,000 Gross profit 585,000 234,000 Accounts receivable 156,000 117,000 Deprec. & amort Expense (39,000) (26,000) Inventory 364,000 182,000 Operating expenses (390,000) (104.000) Equity investment 862.000 Interest expense (19.500) 6,500) Property, plant & equipment 442,000 312,000 Total expenses (448,500) (136,500) Other assets 169.000 286,000 Income (loss) from subsidiary 45.500 Total assets 2,110,000 $975,000 Net income $182,000 $97.500 Liabilities and stockholders' equity Accounts payable $325.000 $70,200 Statement of retained earnings Accrued liabilities 32 500 59,800 BOY retained earings $715,000 $325,000 Notes payable 195.000 78,000 Net income 182.000 97 500 Common stock 810,000 390,000 Dividends (149 500) (45.500) Retained earnings 377000 Ending retained carings $747,500 $377,000 Total liabilities and equity 2,110,000 $975,000 747 500 Prior to preparing consolidated financial statements compute the amount of equity income the parent would have reported for the year ended December 31, 2016 assuming the parent applied the equity method instead of the cost method of pre-consolidation bookkeeping 0 SAnswer d. Prior to preparing consolidated financial statements, compute the amount of Equity investment the parent would have reported on December 31, 2016 assuming the parent applied the equity method instead of the cost method of pre-consolidation bookkeeping, Do not use negative signs with your answers below. Equity Investment ("as if" Equity Method) 0 Answer Common Stock (S) @ EOY 0 Answer Retained Earnings (S) @ EOY Unamortized AAP @ EOY Answer! 0 Answer Add: Unconfirmed gain @ EOY Answer! 0 Answer Deduct: 0 Answer EOY Investment ("as it equity method)
