Consolidation subsequent to date of acquisition - Equity method with noncontrolling interest and AAP Assume that, on January 1, 2009, a parent company acquired an 80% interest in its subsidiary. The total fair value of the controlling and noncontrolling interests was $500,000 over the book value of the subsidiary's Stockholders' Equity on the acquisition date. The parent assigned the excess to the following [A] assets: [A] Asset Initial Fair Value Useful Life (years) Initial Useful [A] Asset Fair Value Life (years) Property, plant and equipment (PPE), net $80,000 10 Customer list 170.000 10 250.000 Indefinite $500,000 Goodwill 80% of the Goodwill is allocated to the parent. The parent and the subsidiary report the following financial statements at December 31, 2013: Parent Subsidiary Parent Subsidiary Income statement: Balance sheet: Sales $7,330,000 $1,875,500 Assets Cost of goods sold (5.131,000) (1.122.300) Cash $415,313 $136,511 Gross profit 2,199,000 753,200 Accounts receivable 938,240 433.956 Income (loss) from subsidiary 193,496 Inventory 1,422,020 557,409 Operating expenses (1.392,700) (486,330) Equity investment 1,479,671 Net income $999.796 266,870 Property, plant and equipment (PPE). net 5,374,356 1,280,669 $9,629,600 $2,408,545 $1,053,321 $433,956 Statement of retained earnings: BOY retained earnings $3,682,592 $966,425 Liabilities and stockholders' equity Net income 999,796 266,870 Current liabilities Dividends (199,159) (39.281) Long-term liabilities EOY retained earnings $4,483,229 $1,194,014 Common stock APIC Retained earnings 500,000 2,000,000 1,198,455 124,700 894,595 155,875 4,483,229 1,194,014 $9,629,600 $2,408,545 a. Disaggregate and document the activity for the 100% Acquisition Accounting Premium (AAP), the controlling interest AAP and the noncontrolling interest AAP. Note: Do not use negative signs with any of your answers below. Unamortized Unamortized Unamortized Unamortized Unamortized 2009 2010 2011 AAP 2012 2013 1/1/2009 Amortization 1/1/2010 Amortization 1/1/2011 Amortization 1/1/2012 Amortization 1/1/2013 Amortization Property, plant and equipment (PPE). net Customer list Goodwill Unamortized 1/1/2014 Parent: Property, plant and equipment (PPE). net Customer list Goodwill Subsidiary Property, plant and equipment (PPE).net Customer list Goodwill b. Calculate and organize the profits and losses on intercompany transactions and balances. Downstream Upstream Jan. 1. 2013 Dec 31, 2013 c. Compute the pre-consolidation Equity Investment account beginning and ending balances starting with the stockholders' equity of the subsidiary. Round answers to the nearest whole number. Equity investment al 1/1/13: Common stack APIC Retained earnings Equity investment at 12/31/13: Common stock APIC Retained earnings d. Reconstruct the activity in the parent's pre-consolidation Equity Investment T-account for the year of consolidation. Round answers to the nearest whole number. Equity Investment Balance at 1/1/13 Dividends Balance at 12/31/13 e. Independently compute the owners' equity attributable to the noncontrolling interest beginning and ending balances starting with the owners' equity of the subsidiary. Round answers to the nearest whole number. Noncontrolling interest at 1/1/13: Common stock APIC Retained earnings Noncontrolling interest al 12/31/13: Common stock APIC Retained earnings f. Independently calculate consolidated net income, controlling interest net income and noncontrolling interest net income. Round answers to the nearest whole number Use negative signs with answers that reduce net income. Consolidated Parent's stand alone net income Subsidiary's stand-alone net income Subsidiary's adjusted stand-alone net income Consolidated net income Parent: Parent's stand-alone net income Subsidiary's stand-alone net income Less: 80% of subsidiary's stand-alone net income Consolidated net income attributable to the parent Subsidiary 20% of subsidiary's stand-alone net income Less: 3. Complete the consolidating entries according to the C-E-A-D-I sequence. Consolidation Worksheet Description Debit IC Equity income Credit Dividends Cquity investment 1 Common stock APIC Equity investment CAL Property, plant and equipment (PPE), nel Customer list Equity investment Consolidation subsequent to date of acquisition - Equity method with noncontrolling interest and AAP Assume that, on January 1, 2009, a parent company acquired an 80% interest in its subsidiary. The total fair value of the controlling and noncontrolling interests was $500,000 over the book value of the subsidiary's Stockholders' Equity on the acquisition date. The parent assigned the excess to the following [A] assets: [A] Asset Initial Fair Value Useful Life (years) Initial Useful [A] Asset Fair Value Life (years) Property, plant and equipment (PPE), net $80,000 10 Customer list 170.000 10 250.000 Indefinite $500,000 Goodwill 80% of the Goodwill is allocated to the parent. The parent and the subsidiary report the following financial statements at December 31, 2013: Parent Subsidiary Parent Subsidiary Income statement: Balance sheet: Sales $7,330,000 $1,875,500 Assets Cost of goods sold (5.131,000) (1.122.300) Cash $415,313 $136,511 Gross profit 2,199,000 753,200 Accounts receivable 938,240 433.956 Income (loss) from subsidiary 193,496 Inventory 1,422,020 557,409 Operating expenses (1.392,700) (486,330) Equity investment 1,479,671 Net income $999.796 266,870 Property, plant and equipment (PPE). net 5,374,356 1,280,669 $9,629,600 $2,408,545 $1,053,321 $433,956 Statement of retained earnings: BOY retained earnings $3,682,592 $966,425 Liabilities and stockholders' equity Net income 999,796 266,870 Current liabilities Dividends (199,159) (39.281) Long-term liabilities EOY retained earnings $4,483,229 $1,194,014 Common stock APIC Retained earnings 500,000 2,000,000 1,198,455 124,700 894,595 155,875 4,483,229 1,194,014 $9,629,600 $2,408,545 a. Disaggregate and document the activity for the 100% Acquisition Accounting Premium (AAP), the controlling interest AAP and the noncontrolling interest AAP. Note: Do not use negative signs with any of your answers below. Unamortized Unamortized Unamortized Unamortized Unamortized 2009 2010 2011 AAP 2012 2013 1/1/2009 Amortization 1/1/2010 Amortization 1/1/2011 Amortization 1/1/2012 Amortization 1/1/2013 Amortization Property, plant and equipment (PPE). net Customer list Goodwill Unamortized 1/1/2014 Parent: Property, plant and equipment (PPE). net Customer list Goodwill Subsidiary Property, plant and equipment (PPE).net Customer list Goodwill b. Calculate and organize the profits and losses on intercompany transactions and balances. Downstream Upstream Jan. 1. 2013 Dec 31, 2013 c. Compute the pre-consolidation Equity Investment account beginning and ending balances starting with the stockholders' equity of the subsidiary. Round answers to the nearest whole number. Equity investment al 1/1/13: Common stack APIC Retained earnings Equity investment at 12/31/13: Common stock APIC Retained earnings d. Reconstruct the activity in the parent's pre-consolidation Equity Investment T-account for the year of consolidation. Round answers to the nearest whole number. Equity Investment Balance at 1/1/13 Dividends Balance at 12/31/13 e. Independently compute the owners' equity attributable to the noncontrolling interest beginning and ending balances starting with the owners' equity of the subsidiary. Round answers to the nearest whole number. Noncontrolling interest at 1/1/13: Common stock APIC Retained earnings Noncontrolling interest al 12/31/13: Common stock APIC Retained earnings f. Independently calculate consolidated net income, controlling interest net income and noncontrolling interest net income. Round answers to the nearest whole number Use negative signs with answers that reduce net income. Consolidated Parent's stand alone net income Subsidiary's stand-alone net income Subsidiary's adjusted stand-alone net income Consolidated net income Parent: Parent's stand-alone net income Subsidiary's stand-alone net income Less: 80% of subsidiary's stand-alone net income Consolidated net income attributable to the parent Subsidiary 20% of subsidiary's stand-alone net income Less: 3. Complete the consolidating entries according to the C-E-A-D-I sequence. Consolidation Worksheet Description Debit IC Equity income Credit Dividends Cquity investment 1 Common stock APIC Equity investment CAL Property, plant and equipment (PPE), nel Customer list Equity investment