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 Original

Amount Original Useful

Life $($years$)$

Property, plant and equipment $($PPE$),$ net $$100,00020$

Customer list $165,00010$

Royalty agreement $135,00010$

Goodwill $100,000$ indefinite

$$500,000$

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 Gross Profit

Remaining

in Unsold

Inventory

Receivable

$($Payable$)$

$2013$ $$68,000$ $$19,580$ $$27,400$

$2012$ $$43,700$ $$12,797$ $$13,437$

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 $$69,837$ Income $($loss$)$ from subsidiary reported by the parent during $2013.$ Hint: Use negative signs with answers when appropriate.

Answer

Net income of subsidiary

Answer

Plus: Answer

Prior year intercompany gross profit

Answer

Less: Answer

Current year intercompany gross profit

Answer

AAP depreciation Answer

Income $($loss$)$ from subsidiary Answer