Consolidation at the end of the first year subsequent to date of acquisitionCost method (purchase price equals book value) Assume that the parent company acquires its subsidiary on January 1, 2016, by exchanging 31,500 shares of its $1 par value Common Stock, with a market value on the acquisition date of $40 per share, for all of the outstanding voting shares of the acquiree You have been charged with preparing the consolidation of these two companies at the end of the first year On the acquisition date, all of the subsidiarys assets and liabilities had fair values equaling their book values Following are financial statements of the parent and its subsidiary for the year ended December 31, 2016 Parent Subsidiary Parent Subsidiary Income statement Balance sheet Sales $3,330,000 $1,890,000 Assets Cost of goods sold (2,331,000) (1,134,000) Cash $789,660 $486,990 Gross profit 999,000 756,000 Accounts receivable 426,240 438,480 Equity income 39,690 Inventory 646,020 563,220 Operating expenses (632,700) (491,400) Equity investment 1,260,000 Net income $405,990 $264,600 Property, plant equipment 2,441,556 1,042,020 Statement of retained earnings $5,563,476 $2,530,710 BOY retained earnings 2,116,800 976,500 Liabilities and stockholders' equity Net income 405,990 264,600 Accounts payable $243,756 $180,180 Dividends (126,180) (39,690) Accrued liabilities 289,710 235,620 Ending retained earnings $2,396,610 $1,201,410 Long term liabilities 630,000 Common stock 466,200 126,000 APIC 2,167,200 157,500 Retained earnings 2,396,610 1,201,410 $5,563,476 $2,530,710 a Prepare the journal entry to record the acquisition of the subsidiary General Journal Description Debit Credit Answer Answer Answer Common stock Answer Answer Answer Answer Answer b Prepare the consolidation entries for the year ended December 31, 2016 If no consolidation entry is necessary for a particular step (i e ADJ, C, or E), select No entry as your answers for the journal descriptions Consolidation Journal Description Debit Credit ADJ Answer Answer Answer Answer Answer Answer C Answer Answer Answer Answer Answer Answer E Common stock Answer Answer APIC Answer Answer Answer Answer Answer Answer Answer Answer

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Consolidation at the end of the first year subsequent to date of acquisitionCost method (purchase price equals book value) Assume that the parent company acquires

Consolidation at the end of the first year subsequent to date of acquisitionCost method (purchase price equals book value) Assume that the parent company acquires its subsidiary on January 1, 2016, by exchanging 31,500 shares of its $1 par value Common Stock, with a market value on the acquisition date of $40 per share, for all of the outstanding voting shares of the acquiree. You have been charged with preparing the consolidation of these two companies at the end of the first year. On the acquisition date, all of the subsidiarys assets and liabilities had fair values equaling their book values. Following are financial statements of the parent and its subsidiary for the year ended December 31, 2016.

	Parent	Subsidiary		Parent	Subsidiary
Income statement			Balance sheet
Sales	$3,330,000	$1,890,000	Assets
Cost of goods sold	(2,331,000)	(1,134,000)	Cash	$789,660	$486,990
Gross profit	999,000	756,000	Accounts receivable	426,240	438,480
Equity income	39,690	-	Inventory	646,020	563,220
Operating expenses	(632,700)	(491,400)	Equity investment	1,260,000	-
Net income	$405,990	$264,600	Property, plant & equipment	2,441,556	1,042,020
Statement of retained earnings				$5,563,476	$2,530,710
BOY retained earnings	2,116,800	976,500	Liabilities and stockholders' equity
Net income	405,990	264,600	Accounts payable	$243,756	$180,180
Dividends	(126,180)	(39,690)	Accrued liabilities	289,710	235,620
Ending retained earnings	$2,396,610	$1,201,410	Long-term liabilities	-	630,000
			Common stock	466,200	126,000
			APIC	2,167,200	157,500
			Retained earnings	2,396,610	1,201,410
				$5,563,476	$2,530,710