Consolidation on date of acquisition - Equity method with noncontrolling interest and AAP Assume a parent company acquires a 75% interest in its subsidiary for a purchase price of $924,000. The excess of the total fair value of the controlling and noncontrolling interests over the book value of the subsidiary's Stockholders' Equity is assigned to a building (in PPE, net) that is worth $88,000 more than its book value an unrecorded patent with a fair value of $144,000, and Goodwill of $248,000. There is no control premium, so goodwill is assigned proportionally to the controlling and noncontrolling interests. The parent and the subsidiary report the following pre-consolidation balance sheets on the acquisition date, Parent Subsidiary Parent Subsidiary Cash $720,000 $160,000 Current liabilities 5640,000 $252.000 Accounts receivable 625,600 264.000 Long term liabilities 2.400,000 400,000 Inventory 180.000 340,000 Common stock 720,000 72.000 Equity inwestment 924,000 APIC 560,000 96,000 Property, plant, and equipment net 3.200.000 640,000 Retained earnings 2.029.600 584,000 Total assets 56,303.600 1.404.000 Total liabilities and equity 16.0.600 $1,400,000 a. Prepare the consolidation entries on the acquisition date. Consolidation Worksheet Description Debit Credit TE) Common stock APIC D . 0 Equity investment 0 eeeeee o 0 TAL PPE.net Patent 0 Patent > - Equity investment Oo oo b. Prepare the consolidation spreadsheet on the acquisition date. Elimination Entries Parent Subsidiary Dr Cr Consolidated Cash $720,000 $160,000 $ Accounts receivable 625,600 264,000 0 Inventory 880,000 340,000 0 Equity investment 924,000 O [E] 0 O [A] PPE, net 3,200,000 640,000 [A] Patent [A] Goodwill (A) Total Assets $6,349,600 $1,404,000 $ Current liabilities $640,000 $252,000 $ Long-term liabilities 2,400,000 400,000 Common stock 720,000 72,000 (E) 0 APIC 560,000 96,000 (E) 0 Noncontrolling interest 0 [E] 0 [A] Retained earnings 2,029,600 584,000 (E) 0 0 Total Liabilities and Equity $6,349,600 $1,404,000 0 $ 0 olo