Chapter 5 Consolidation subsequent to date of acquisition-upstream intercompany inventory sale- Equity method with noncontrolling interest, AAP, and upstream intercompany inventory sale 31 points 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 Useful [A] Asset Fair Value Life (years) Patent $300,000 10 Goodwill 250,000 Indefinite $550,000 153 590 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 Catera Timbitites 4900.000 Transfer price for inventory sale $674,000 $733,000 1,106,893 15790 Cost of goods sold (615,000) (653,000) 124 955 Gross profit $59,000 $80,000 25% 35% % inventory remaining $11, 145,809 51423.123 Gross profit deferred $14,750 $28,000 EOY receivable/payable $93,000 $105,000 Interests he Com 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 Subsidiary Income statement: Balance sheet: Sales $6,770,000 $2,521,500 Assets Cost of goods sold (4,739,000) (1,511,100) Cash $798,240 $699,785 Gross profit 2,031,000 1,010,400 Accounts receivable 866,560 584,292 Equity income 249,872 Inventory 1,313,380 750,513 Operating expenses (1,242,600) (654,810) 1,849,065 Equity investment $1,038,272 6,317,764 1,388,533 Net income 355,590 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 Liabilities and stockholders' equity Net income 1,038,272 355,590 Current liabilities $972,849 $584,292 Dividends (199,210) (35,259) Long-term liabilities 4,000,000 839,500 EOY retained earnings $4,240,310 $1,621,556 Common stock 1,106,895 167,900 APIC 824,955 209,875 Retained earnings 4,240,310 1,621,556 $11,145,009 $3,423,123 Required: a. Compute the EOY Noncontrolling Interests b. Prepare the Consolidation Entries Answer: a.b. [C] [E] so all of the outstanding Bulbeldian [A] bond discount is amortized sopunt amortization equal The Parent and the Subsidiary report the following franciat statements for the your curled Der webor 21, 2016: [D] $0.000,060 Cost of goods sold Gross Profit 2,060,000 420,000 Equity investment income 109,232 [!cogs] (18.732) ung exponebe (1.200.003) Net income 9. 890.500 [Isales ] Y Retained Earnings 93.741.500 $225.000 Netincome 690 800 147.490 [lcogs] elained Earnings [Isales] J