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: Original Original Useful AAP Asset Amount Property, plant and equipment (PPE), net $100,000 20 Customer list 165.000 10 Royalty agreement 135.000 10 Goodwil 100,000 indefinite $500.000 Life Cyears 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 Inventory (Payable) 2013 2012 543.700 $13,437 Salles $68,000 $19.580 512,797 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. Net income of subsidiary 1011771 Plus: Prior year intercompany gross profit 12797 Less: Current year intercompany gross profit 19580 AAP depreciation -935151 Income foss) from subsidiary 69837 b. Show the computation to yield the Equity Investment balance of 5959,789 reported by the parent at December 31, 2013. Hint: Use negative signs with answers when appropriate. Common stock APIC Retained earnings BOY unamortized AAP BOY deferred profit Income foss) from subsidiary Dividends Equity investment 959789 c. Prepare the consolidation journal entries for the year ended December 31, 2013. Consolidation Worksheet Description Debit Credit [C] Income foss) from subsidiary 69,837 Dividends Equity investment [E] Common stock APIC BOY retained earnings . 0 > a C. Prepare the consolidation journal entries for the year ended December 31, 2013. Consolidation Worksheet Description Debit Credit [C] Income (loss) from subsidiary 69,837 Dividends Equity investment [E] Common stock APIC BOY retained earnings Equity investment [A] PPE net Customer list Royalty agreement Goodwill Equity investment e [D] Operating expenses PPE net Customer list Royalty agreement [lcogs] Equity investment Cost of goods sold [lsales] Sales Cost of goods sold [lcogs] Cost of goods sold Inventory [) Accounts payable Accounts receivable > > > > > d. Prepare the consolidation spreadsheet for the year ended December 31, 2013. Hint: Use negative signs with answers when appropriate. Elimination Entries Parent Sub Dr Cr Consolidated Income statement: Sales $4,370,000 $785,000 (sales s Cost of goods sold (3,059,000) (469,800) [icogs [lcogs [Isales] Gross profit 1,311,000 315,200 $ Income (loss) from subsidiary 69,837 C] Operating expenses (830,300) (203,580) [D Net income $550,537 5111,620 $ Statement of retained earnings: BOY retained earnings $2,195,488 $404,550 IE) $ Net income 550,537 111,620 Dividends (128,164) (14,251) [C] EOY retained earnings $2,617,861 $501,919 $ Balance sheet: Assets $ Cash Accounts receivable Inventory PPE, net Customer List Royalty agreement Goodwill Equity investment $650,639 559,360 847,780 4,078,084 $255,087 181,656 233,334 431,694 (A) IA) [A] [A] [Icogs [) [lcogs] ID) [D) ID) 959,789 (C) [E] [A] $7,095,652 $1,101.771 $ Liabilities and stockholders' equity Accounts payable Other currentliabilities Long-term liabilities $ $327,313 403,228 2,500,000 $93,459 payi 127.943 261,000 $ Balance sheet Assets Cash Accounts receivable Inventory PPE, net Customer List Royalty agreement Goodwill Equity investment $650,639 559,360 847,780 4,078,084 $255,087 181,656 233,334 431,694 [pay] [lcogs) [D] [D] [D] (A) [A [A] IA) [lcogs) 959,789 [C] [E] IA) $ $7,095,652 $1,101,771 $ Liabilities and stockholders' equity Accounts payable Other currentliabilities Long-term liabilities Common stock $327,313 $93,459 [lpay 403,228 127,943 2,500,000 261,000 714,495 52,200 [E] 532,755 65,250 (E) 2,617,861 501,919 $7,095,652 $1,101,771 APIC Retained earnings $ $ $