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company sale of equipment Equity method Assume that a parent company acquired its subsidiary on January 1, 2009, ata purchase price that was 5315.000 in

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company sale of equipment Equity method Assume that a parent company acquired its subsidiary on January 1, 2009, ata purchase price that was 5315.000 in excess of the book value of the susidarys Shoholders toy on acquisition date of that excess. $215,000 was assigned to a Customer List that is being noticed over a 10 year period. The remaining 5700300 was assigned to Goodwill In January of 2012, the wholly owned subsidiary sold Equipment to the parent for a cash price of 5118.500 The subsidiary had acquired the equipment atacou of 140.000 and deprecated the equipment over its 10-year useful life using the straight line method (no salvage value). The subsidiary had deprecated the equipment for 4 years at the time of the parent and depreciation policy of the subsidiary and depreciated the equipment over its remaining 6 year useful life Financial statements of the parent and its subsidiary for the year ended December 31, 2013 follow in part below the parentes the equity method to account for its Equity Investment. The Customer List was amortized as part of the parents equity method accounting 3. Prepare the journal entry that the subsidiary made to record the sale of the equipment to the parent. the journal entry that the parent made ter ere purchase and restore year of sale Journal Entries Description Bahrt Credit subsidiary Cath 0 6 + 0 Property, planteament 0 0 Parent O 0 . 0 0 Tail 0 a 0 Property, plant & equipment . 0 Dilder! 0 0 0 0 b. Compute the remaining portion of the deferred gain on January 1, 2013. $0 c. Show the computation to yield the $127,250 of income (loss) from subsidiary reported by the parent for the year ended December 31, 2013, Note: Use a negative sign with an answer to indicate a reduction in the computation Net income of subsidiary AAP Depreciation 0 Income (loss) from subsidiary 0 0 0 0 0 d. Compute the Equity Investment balance of $811,500 on December 31, 2013 Note: Use a negative sign with an answer to indicate a reduction in the computation Common stock APIC EOY Retained earnings EOY Unamortized AAP 0 Gain on intercompany sale Equity investment 0 0 0 2012 e. Prepare the consolidation entries for the year ended December 31, 2013 Consolidation Worksheet Description Debit Credit 10 Dividende 1 0 0 LE o APIC Retained earning 0 0 0 0 0 0 TAI Customers O 2 . O o ID: Operating expenses 0 0 a 0 a 0 Train Equity investment 2 0 O . Ildepri 0 Prenare the consolidation spreadsheet for the year ended December 31, 2013 Elimination Entries Dr Cr Consolidated 0 0 0 0 OOOOO 0 0 O depr 5 0 0 0 Income statement: Parent Sub Sales $10,000,000 $1,003,000 Cost of goods sold (7.200,000) (600,000) Gross profit 2,800,000 403,000 Income (loss) from subsidiary 127.250 [C] Operating expenses (1.500,000) (260,000) (D) Net income $1.427,250 $143,000 Statement of retained earnings: BOY retained earnings $5,814,300 $225,000 (E) Net income 1,427,250 143,000 Dividends (285,200) (20,000) EOY retained earnings 56,956,350 $348,000 Balance sheet: Assets Cash 51,058,100 $325,000 Accounts receivable 1,750,000 430,000 Inventory 2,600,000 550,000 PPE, net 10,060,000 1,030,000 gain] Ildepri Customer List IA) [A] Goodwill 811,500 Equity investment [gain) 0 (0) Oo oo $ $ OOOO o gain 0 OOOOO 0 (D) 0 0 0 0 C] 0 IE) OIA] 5 0 $ $16,279,600 52.335,000 Liabilities and stockholders' equity Accounts payable $1,010,000 $178,000 Other currentliabilities 1,190,000 230,000 Long-term liabilities 2.500,000 1.300,000 Common stock 553,000 124,000 APIC 4,070,250 155,000 Retained earnings 6,956,350 348,000 $16,279,600 $2,335,000 0 0 0 0 0 [E] IE) oo 0 0 0 5 05 $

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