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 Original Useful Property, plant and equipment (PPE) net $100,000 Customer list Royalty agreement Goodwill 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 pas 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 You have compiled the following data for the years ending 2012 and 2013: 2013 2012 Inventory Sales Gross Profic Remaining In Unsold Receivable Inventory (Payable) 58,000 $19.280 $27,100 700 $12.497 $13,137 The inuanin namaining 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 The inventory not remaining at the end of the year has been sold to unaffiliated entities side 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 2013, follow in part d. below. a. Show the computation to yield the pre-consolidation $70,837 Income (loss) from subary reported by the parent during 2013. Hint: Use negative signs with answers when appropriate. Addation inco Ooss) from subsidiary 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 BOY unamortized AAP BOY deferred fit 0 Incame (oss) from subsidiary 9 0 c. Prepare the consolidation journal entries for the year ended December 31, 2013. Consolidation Worksheet Description [C] Dividends [E] Common stock APIC [A] PPE net Customer list Royalty agreement [D] PPE net Customer list 42 Debit Credit 0 0 10 0 oo 0 0 0 [Icogs] 413 To recognize deferred profit on prior year's sale. [Isales] 4 443 000 oooooooooO 10 0 0 0 0 OO 0 0 0 (sales) [Icogs] 0 0 To defer gross profit on intercompany sale, 0 0 DO 0000 0 O d. Prepare the consolidation spreadsheet for the year ended December 31, 2013. Hint: Use negative signs with answers when appropriate. Income statement Sales Cost of goods sold Gross profit Income (loss) from subsidiary Operating expenses Net Income Statement of retained earnings: BOY retained earnings Net income Dividends EOY retained earnings Parent Sub $4,370,000 $786,000 sale Elimination Entries Dr Cr (3.059,000) (469,800) (cogs) 1.311,000 316,200 70,837 (830,300) (203,580) [D] 32 [C] 0 0 $551,537 $112,620 $2,195,488 $404.550 [E] 551,537 112.620 (129,164) (14,251) $2,617,861 $502.919 Consolidated (cogs O sales] $ $ 00 [C] $ 0 BOY retained earnings Net income Dividends EOY retained earnings Balance sheet: $2,195,488 $404,550 [E] 10 551,537 112,620 (129,164) (14,251) $2,617,861 $502,919 Assets Cash Accounts receivable Inventory PPE, net Customer List Royalty agreement Goodwill Equity investment $650,639 $256,087 559,360 181,656 847,780 233,334 4,078,084 431,694 [A] [A] [A] [A] 961,089 [icogs] 000OO Liabilities and stockholders' equity Accounts payable Other currentliabilities Long-term liabilities Common stock $7,096,952 $1,102,771 $327,313 593,459 [Ipayl 403,228 127,943 0 2,500,000 261,000 714,495 52,200 [E] 0 APIC 534,055 65,250 [E] 0 Retained earnings 2,617,861 502,919 $ 000 0 [C] $ 0 0 ] $ O 10 0 [Icogs] 0 10 [D] 10 OLO 0 [D] 0 0 [D] 0 0 OOO 0 [C] 10 0 [E] 0 [A] $ EQ $ 0 0 0 0 0 0