Consolidation Accounting Parent Co Sub Co Income Statement Sales 5,700,000 480,000 Cost of goods sold 3,990,000 288,000 Gross profit 1,710,000 192,000 Operating expenses 903,800 106,950 Income from operations 806,200 85,050 Equity income 47,200 0 Income before income tax 853,400 85,050 Income tax 179,200 17,850 Net income 674,200 67,200 Statement of Retained Earnings Beginning retained earnings 2,863,680 248,000 Net income 674,200 67,200 Dividends (134,840) (10,080) Ending retained earnings 3,403,040 305,120 Balance Sheet Assets Cash 354,870 129,440 Accounts receivable 729,600 111,360 Inventory 1,105,800 143,040 Total current assets 2,190,270 383,840 Property, plant and equipment, net 5,319,240 264,640 Investment in subsidiary 837,120 0 Total assets 8,346,630 648,480 Liabilities & Stockholders' Equity Other liabilities 819,090 111,360 Total current liabilities 819,090 111,360 Notes payable 2,500,000 160,000 Common stock 931,950 32,000 Retained earnings 3,403,040 305,120 Additional paid in capital 692,550 40,000 Total stockholders' equity 5,027,540 377,120 Total liab & stockholders' eq 8,346,630 648,480 Consolidation Accounting Facts: Assume that on January 1, Parent Company ("Parent Co") acquires 100% of the common stock of Subsidiary Company ("Sub Co") for $800,000. On the acquisition date, Sub Co reports a book value of Stockholders' Equity of $320,000. Parent Co is willing to pay the purchase price because the subsidiary owns property, plant and equipment that are worth $150,000 more than the amount at which they are reported on Sub Co's books. In addition, Sub co owns a customer list that has a fair value equal to $50,000. Both of these identifiable assets are depreciated or amortized over a 10 year period with no salvage value. Any remaining excess purchase price is attributed to corporate synergies that Parent Co expects to realize following the combination of the two companies. Parent Co and Sub Co's financial statements at the end of the first year following the acquisition are detailed in the Excel file "Case 1 - Advanced accounting topics." Required: Using the Excel file "Case 1 - Advanced accounting topics, prepare the consolidated financial statements at the end of the first year following the acquisition