Consolidation several years subsequent to date of acquisition-Equity method Assume a parent company acquired a subsidiary on January 1, 2017. The purchase price was 1820,000 in excess of the shadary's book value of Stockholdere Builty on the comition date and that excess was assigned to the following (A) assets Original Original Useful TA Asset Anet Property, plant and equipment (PPE net 240.000 12 years Patent 340,000 years License 160.000 10 years Goodwill 180.000 indefinite 5820,000 The Al assets with definite useful lives have been depreciated or amortized as part of the parents preconsolidation equity method accounting. The Goodwill has been used 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 11,2019, are as follows Parent Subsidiary Parent Subsidiary Income statement Balance sheet Sales 34.000.000 31. 100.000 Assets Cost of poods sold 2.500,0003074.000 ch 1720.000 $130.000 Gross pront 1.100.000 526.000 Accounts receivable 210.000 Equity income 120.000 450.000 S00.000 Operating expenses 720.000 40.000) uitywestment 1.100.000 Net 5700.000 11.000 Pretty plant een 700.000 Statement of retained earnings 10000 100.000 ROY retained and 1.600.000 650,000 Les and stockholders uity Net income 700.000 155,000 Accounts payable 30.000 Dividends 360.000 0600 Accruedas S40.000 160.000 10000 Ending and $330.000 Long-termitates 49000 2.150.000 Commons 690.000 590 AMC L700.000 150 Retinden 1. 10000 10 000 15.000.000 10.000 Retained earnings 1,940,000 830,000 $8,000,000 $1,890,000 a. Compute the Equity Investment balance as of January 1, 2019. 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 $ $ 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 1/1/19 Plus: Less Equity Investment at 12/31/19 $ e d. Prepare the consolidation entries for the year ended December 31, 2019 Consolidation Journal Description Debit Credit [CI . Equity investment IEJ Common Stock APIC d. Prepare the consolidation entries for the year ended December 31, 2019. Consolidation Journal Description Debit Credit [C] 4 Equity investment TE] Common Stock APIC IAJ PPE, net Patent Licenses 44 [D] Patent Licenses 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 D- Consolidation Worksheet Parent Subsidiary Debit Credit Consolidated Income statement Sales $4,800,000 $1,300,000 Cost of goods sold (3,500,000) 1774,000) Gross profit 1,300,000 526,000 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. Consolidation Worksheet Parent Subsidiary Debit Credit Consolidated income statement Sales $4,800,000 $1,300,000 $ Cost of goods sold (3,500,000) (774,000) Gross profit 1,300,000 526,000 Equity income 120,000 [C] Operating expenses (720,000) (340,000) (0) Net income $700,000 $186,000 $ Statement of retained earnings BOY retained earnings $1,600,000 5680,000 LEI 5 Net income 700,000 186,000 Dividends (360,000) 36,000) IC Ending retained earnings $1,940,000 $830,000 Balance sheet Assets Cash $720,000 $330,000 $ Accounts receivable 1.130,000 280.000 Inventory 1.450,000 500,000 IC 1,800,000 Equity investment TE) [A] 2.900,000 PPE, net ] THU Q00 [A] Dj (A) Patent [D] TA Licenses Goodwill IA 5 58,000,000 $1,890.000 Liabilities and equity 5 Accounts payable $760,000 $122.000 Accrued liabilities 840,000 160,000 2.150,000 430 000 780,000 Long-term liabilities 5 BOY retained earnings Net income Dividends Ending retained earings Balance sheet $1,600,000 700,000 (360,000) $1,940,000 $680,000 (E) 186,000 (36,000) $830,000 [C] $ Assets Cash Accounts receivable Inventory Equity investment $720,000 1,130,000 1,450,000 1,800,000 $330,000 280,000 500,000 [C [E [A] [D] [D] [ [D] 2,900,000 780,000 TAI PPE, net Patent Licenses Goodwill $8,000,000 $1,890,000 $ 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 IEDS 1,700,000 158,000 TE 5 1,940,000 830,000 $8,000,000 $1,890,000 $ Consolidation several years subsequent to date of acquisition-Equity method Asume a parent company coured wdary on January 1, 2017. The purchase pricewa 5870,000 in excess of the subsidiary book value of Stockholders founy on the question des that excess was assigned to the following TA Original Original Useful TALA Amount Life Property plant and connet 5240000 12 years PM 10,000 year 160.000 10 years 000 in die 520000 The assets with definite useful lives have been depreciated or amortired as part of the parent's 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 Parent Subsidiary Parent subsidiary come statement Balance sheet 14. 100.000 51.000.000 Assets Cost of goods sold 0.500.000 17.000 Cash 5720.000 5330,000 Gros profe 1.300.000 525,000 Accounts receivable 1,130.000 280.000 fauty income 120.000 Inventory 1.450.000 500 000 Operating expenses 20.000 (340,000) Equity investment 1.800.000 Netice 5700.0005166,000 Property, plant equipment et 2.000.000 780.000 Statement of retained earnings S8,000,000 000 BOY retained mig 600.000 680,000 Liabeties and stockholdersey Net income 700.000 185,000 Accounts payable 5760000 1122.000 Dhegends (360,000 36,000) Acued liabilities 340.000 10.000 Inding retained camins SE540,000 $830,000 intermite 2.150.000 130,000 Common stock 610.000 190.000 ARIS 1,700.000 158,000 Retained earrings 100,000 130 000 SRO,000 $10000 *Compute the Equity Investment balance as of January 1, 2019. 0 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 0 $ 0 0 0 0 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 1/1/19 Plus Less: . Equity investment at 12/31/19 5 0 0 0 0 0 0 d. Prepare the consolidation entries for the year ended December 31, 2019. Consolidation Journal Description Debit Credit [C] 0 0 0 Equity investment 0 0 [E) Common Stock 0 APIC 0 0 0 0 0 0 0 0 IAJ PPE, net Patent Licenses 0 OOO 0 0 4) e [D] OOOOO Patent Licenses her 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. Consolidation Worksheet Parent Subsidiary Debit Credit Consolidated Income statement Sales $4,800,000 $1,300,000 $ 0 Cost of goods sold (3,500,000) (774,000) 0 Gross profit 1,300,000 526,000 I 0 Equity income 120,000 [C] 0 Operating expenses (720,000) (340,000) (D) 0 0 Net income 5700,000 $186,000 $ 0 Statement of retained earnings BOY retained earnings $1,600,000 $680,000 (E) 0 $ 0 Net Income 700,000 186,000 0 Dividends (360,000) (36,000) 0 IC Ending retained earnings $1,940,000 $830,000 Balance sheet Assets $720.000 $330,000 Cash 1.130,000 280,000 Accounts receivable 1,450,000 500,000 Inventory 0 C) Equity Investment 1,800,000 0 LEI 0. TAI OO $ 0 0 D Debit Credit Consolidated $ 0 0 0 0 0 0 5 0 Parent Subsidiary Income statement Sales $4,800,000 $1,300,000 Cost of goods sold (3,500,000) (774,000) Gross profit 1,300,000 526,000 Equity income 120,000 - [C] Operating expenses (720,000) (340,000) [D] Net income $700,000 $186,000 Statement of retained earnings BOY retained earnings $1,600,000 $680,000 [EJ Net income 700,000 186,000 Dividends (360,000) (36,000) Ending retained earnings $1,940,000 $830,000 Balance sheet Assets Cash $720,000 $330,000 Accounts receivable 1.130,000 280,000 Inventory 1,450,000 500,000 Equity investment 1,800,000 0 5 0 0 0 [C] 0 $ 0 5 OOO 0 [C] O [E] 0 (A) 2.900,000 780,000 [A] PPE, net Patent Licenses Goodwill 3333 OOOO 0 [D] OD) OD ooooo $8,000,000 $1,890,000 $ Liabilities and equity Accounts payable Accrued liabilities Long-term Tiabilities Common stock APIC Retained earnings $760,000 $122,000 840,000 160,000 2,150,000 430,000 610,000 190,000 EDS 1,700,000 158,000 (EDS 1.940,000 830,000 $8,000,000 $1,890,000 $ 0 0 o o o o o o o 05