Consolidation several years subsequent to date of acquisitionEquity method Assume a parent company acquired a subsidiary on January 1, 2017. The purchase price was $820,000 in excess of the subsidiarys book value of Stockholders Equity on the acquisition date, and that excess was assigned to the following [A] assets:

The [A] assets with definite useful lives have been depreciated or amortized as part of the parents preconsolidation equity method accounting. The Goodwill asset has been tested annually for impairment, and has not been found to be impaired. The financial statements of the parent and its subsidiary for the year ended December 31, 2019, are as follows:

a. Compute the Equity Investment balance as of January 1, 2019.

$Answer

b. Show the computation to yield the $120,000 equity income reported by the parent for the year ended December 31, 2019.

Do not use negative signs with your answers.

Subsidiary net income		?
Less: Amortization	?
Less: Depreciation	?	?
		?

c. Show the computation to yield the $1,800,000 Equity Investment account balance reported by the parent at December 31, 2019.

Do not use negative signs with your answers.

Equity investment at 1/1/16		?
Plus: ?	?
Less: ?	?	?
		?

d. Prepare the consolidation entries for the year ended December 31, 2019.

e. Prepare the consolidated spreadsheet for the year ended December 31, 2019.

Use negative signs with answers in the Consolidated column for Cost of goods sold, Operating expenses and Dividends.

Original Original Useful [A] Asset Amount Life Property, plant and equipment (PPE), net $240,000 12 years Patent 240,000 8 years License 160.000 10 years Goodwill 180,000 Indefinite $820,000 Parent Subsidiary Income statement Sales Cost of goods sold Gross profit Equity income Operating expenses Net income Statement of retained earnings BOY retained earnings Net income Dividends Ending retained earnings Parent Subsidiary Balance sheet $4,800,000 $1,300,000 Assets (3,500,000) (774,000) Cash 1,300,000 526,000 Accounts receivable 120,000 Inventory (720,000) (340,000) Equity investment $700,000 $186,000 Property, plant & equipment, net $720,000 $330,000 1,130,000 280,000 1,450,000 500,000 1,800,000 2,900,000 780,000 $8,000,000 $1,890,000 1,600,000 700,000 (360,000) $1,940,000 680,000 Liabilities and stockholders' equity 186,000 Accounts payable (36,000) Accrued liabilities $830,000 Long-term liabilities Common stock APIC Retained earnings $760,000 $122,000 840,000 160,000 2,150,000 430,000 610,000 190,000 1,700,000 158,000 1,940,000 830,000 $8,000,000 $1,890,000 Credit 0 0 Consolidation Journal Description Debit [C] Equity investment . Equity income Equity investment [E] Common Stock APIC 0 0 0 0 0 0 0 0 0 0 0 0 0 0 [A] PPE, net Patent Licenses 0 0 0 0 0 0 0 0 [D] 0 0 0 0 0 0 Patent Licenses 0 0 Consolidation Worksheet Parent Subsidiary Debit Credit Consolidated $ 0 0 0 $4,800,000 $1,300,000 (3,500,000) (774,000) 1,300,000 526,000 120,000 [C (720,000) (340,000) [D] $700,000 $186,000 0 0 0 0 $ 0 0 $ 0 Income statement Sales Cost of goods sold Gross profit Equity income Operating expenses Net income Statement of retained earnings BOY retained earnings Net income Dividends Ending retained earnings Balance sheet Assets Cash Accounts receivable Inventory Equity investment $1,600,000 700,000 0 $680,000 [E] 186,000 (36,000) $830,000 0 [C 0 (360,000) $1,940,000 $ 0 $ 0 $720,000 1,130,000 1,450,000 1,800,000 $330,000 280,000 500,000 0 0 0 O [C] 0 [E] 0 [A] 0 [D] 0 [D] 0 [D] PPE, net 2,900,000 0 0 Patent 780,000 [A] [A] [A] 0 0 Licenses 0 0 Goodwill [A] 0 olo $8,000,000 $1,890,000 $ $ 0 Liabilities and equity Accounts payable Accrued liabilities Long-term liabilities Common stock APIC Retained earnings $760,000 $122,000 840,000 160,000 2,150,000 430,000 610,000 190,000 [E] $ 1,700,000 158,000 [E] $ 1,940,000 830,000 $8,000,000 $1,890,000 $ oooo 0 0 0 0 $ $ 0