Consolidation spreadsheet for continuous sale of inventory - Equity method Assume that a parent company acquired a subsidiary on January 1, 2010. The purchase price was $500,000 million in excess of the subsidiary's book value of Stockholders' Equity on the acquisition date, and that excess was assigned to the following AAP assets: AAP Asset Property plant and equipment (PPE), net $100,000 Customer list Moyalty agreement Goodwil Original Original Useful Amount Life (years) 20 180,000 120,000 100.000 $500.000 10 10 indefinite The AAP assets with a definite useful life have been amortized as part of the parent's equity method accounting. The Goodwill asset has been tested annually for impairment, and has not been found to be impaired Assume that the parent company sells inventory to its wholly owned subsidiary. The subsidiary, ultimately, sells the inventory to customers outside of the consolidated group You have compiled the following data for the years ending 2012 and 2013: Gross Profit Remaining Inventory in Unsold Receivable Sales Inventory (Payable) 2013 $68.000 $19,280 $27,100 The AAP assets with a definite useful life have been amortized as part of the parent's equity method accounting. The Goodwill asset has been tested annually for impairment, and has not been found to be impaired. Assume that the parent company sells inventory to its wholly owned subsidiary. The subsidiary, ultimately, sells the inventory to customers outside of the consolidated group You have compiled the following data for the years ending 2012 and 2013: Inventory Sales 2013 $68.000 2012 $43,700 Gross Profit Remaining in Unsold Receivable Inventory (Payable $19.280 $27,100 $12,497 $13,137 The inventory not remaining at the end of the year has been sold to unaffiliated entities outside of the consolidated group. The parent uses the equity method to account for its Equity Investment. The financial statements of the parent and its subsidiary for the year ended December 31, 2013, follow in part d. below. a. Show the computation to yield the pre-consolidation $70,837 Income (loss) from subsidiary reported by the parent during 2013, Hint: Use negative signs with answers when appropriate. Net income of subsidiary Plus Prior year intercompany gross profit Les Current year intercompany gross profit AAP depreciation Income Bosio from subsidiary 500,000x 4 135,000 35,000 360,000 70.837 b. Show the computation to yield the Equity Investment balance of $961,089 reported by the parent at December 31, 2013. Hint: Use negative signs with answers when appropriate. Common stock APIC Retained earnings 52,200 65,250 404.550 BOY unamortized AAP 87,500 x BOY deferred profit Income (loss) from subsidiary Dividends Equity investment 87,500 x 67,837 14.251 N c. Prepare the consolidation journal entries for the year ended December 31, 2013. Consolidation Worksheet Description C) Income (loss) from subsidiary Debit 67,837 x Credit Dividends 14251 Equity investment 06 53.586 x ORS Common stock 52,200 APIC 65,250 v BOY retained earnings 404,550 96 Equity investment 06 52,200x [A] PPE net 85,000