Chapter 6 15 Points 5-Assume that a Parent company acquires a 90% interest in its subsidiary on January 1, 2014. On the date of acquisition, the fair value of the 90% controlling interest was $1,440,000 and the fair value of the 10% noncontrolling interest was $160,000. On January 1, 2014, the book value of net assets equaled $1,600,000 and the fair value of the identifiable net assets equaled the book value of identifiable net assets (i.e. there was no AAP or Goodwill) On December 31, 2015, the Subsidiary company issued $1,500,000 (face) 7 percent, five-year bonds to an unaffiliated company for $1,629,884 (i.e. the bonds had an effective yield of 5 percent). The bonds pay interest annually on December 31, and the bond premium is amortized using the straight-line method. This results in annual bond-payable premium amortization equal to $25,977 per year On Decembel 31, 2017, the Parent paid $1,461,344 to purchase all of the outstanding Subsidiary company bonds (i.e. the bonds had an effective yield of 8 percent). The bond discount is amortized using the straight-line method, which results in annual bond-investment discount amortization equal to $12,885 per year. The Parent and the Subsidiary report the following financial statements for the year ended December 31, 2018: Income Statement Parent $13,000,000 (9.500,000 3,500,000 70,017 117,885 Subsidia ry $1,600,000 1040,000 560,000 Sales Cost of goods sold Gross Profit Equity investment income Bond interest income Bond interest expense Operating expenses Net income (79,023) 360.000 $120,977 2.300.000 Statement of Retained Earnings BOY Retained Earnings Net income Dividends EOY Retained Earnings Parent $7,000,000 1,387,90:2 Subsidiary $450,000 120,977 (40,000 370 Balance Sheet Parent Assets Cash Accounts receivable Inventory Equity Investment Investment in bonds PPE, net $ 1,000,000 1,300,000 1,686,931 $ 1,550,000 2,250,000 2,300,000 1,768,804 1,474,229 627,000 2.500,000 Liabilities and Stockholders' Equity: Accounts payable Current Liabilities Bonds payable Long-term Liabilities Common Stock APIC Retained Earnings $ 956,000 1,200,000 1,551,954 900,000 298,000 1,050,000 2,000,000 2,226,131 2,106,000 7,120,000 002 $6.48.1 Requirea Provide the consolidation entries for the year ended December 31, 2018