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 $95,000 10 Customer 155,000 Goodwill 250,000 Indefinite $500,000 list 10 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 $1,871,500 Assets Cost of goods sold (5,131,000) (1,122,300) Cash $412,113 $132,511 Gross Accounts profit 2,199,000 749,200 receivable 938,240 433,956 Income (loss) from subsidiary 190,296 Inventory 1,422,020 557,409 Operating Equity expenses (1,392,700) (486,330) investment 1,476,471 Property plant and Net equipment income $996,596 262,870 (PPE), net 5,374,356 1,280,669 $9,623,200 $2,404,545 Statement of retained earnings: Liabilities BOY and retained stockholders' earnings $3,682,592 $966,425 equity Net Current income 996,596 262,870 liabilities $1,053,321 $433,956 $1,053,321 $433,956 2,000,000 500,000 Net Current income 996,596 262,870 liabilities Long-term Dividends (199,159) (39,281) liabilities EOY retained Common earnings $4,480,029 $1,190,014 stock APIC Retained earnings 1,198,455 891,395 124,700 155,875 4,480,029 1,190,014 $9,623,200 $2,404,545 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 AAP 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 at 1/1/13: Common stock 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 at 12/31/13: Common stock APIC Retained earnings f. Independently calculate consolidated net income, controlling interest net income and noncontrolling interest net income. Round to 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 Less: 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: g. Complete the consolidating entries according to the C-E-A-D-I sequence. Consolidation Worksheet Description Debit [ Equity income Credit Dividends Equity investment [E] Common stock APIC Equity investment [A] Property, plant and equipment (PPE), net Customer list Equity investment [D] Customer list