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)

[A] Asset	Initial Fair Value	Useful Life (years)
Property, plant and equipment (PPE), net	$90,000	10
Customer list	160,000	10
Goodwill	250,000	Indefinite
	$500,000

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	$1,873,000		Assets
Cost of goods sold	(5,131,000)	(1,122,300)		Cash	$413,313	$134,011
Gross profit	2,199,000	750,700		Accounts receivable	938,240	433,956
Income (loss) from subsidiary	191,496			Inventory	1,422,020	557,409
Operating expenses	(1,392,700)	(486,330)		Equity investment	1,477,671
Net income	$997,796	264,370		Property, plant and equipment (PPE), net	5,374,356	1,280,669
					$9,625,600	$2,406,045
Statement of retained earnings:
BOY retained earnings	$3,682,592	$966,425		Liabilities and stockholders' equity
Net income	997,796	264,370		Current liabilities	$1,053,321	$433,956
Dividends	(199,159)	(39,281)		Long-term liabilities	2,000,000	500,000
EOY retained earnings	$4,481,229	$1,191,514		Common stock	1,198,455	124,700
				APIC	892,595	155,875
				Retained earnings	4,481,229	1,191,514
					$9,625,600	$2,406,045

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	Answer
APIC	Answer
Retained earnings	Answer
AnswerCommon stockAPICRetained earningsUnamortized AAP	Answer
	Answer
Noncontrolling interest at 12/31/13:
Common stock	Answer
APIC	Answer
Retained earnings	Answer
AnswerCommon stockAPICRetained earningsUnamortized AAP	Answer
	Answer

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 are reduce net income.

Consolidated:
Parent's stand-alone net income		Answer
Subsidiary's stand-alone net income		Answer
Less:	Answer100% AAP amortization80% AAP amortization20% AAP amortization	Answer
Subsidiary's adjusted stand-alone net income		Answer
Consolidated net income		Answer
Parent:
Parent's stand-alone net income		Answer
Subsidiary's stand-alone net income		Answer
Less:	Answer100% AAP amortization80% AAP amortization20% AAP amortization	Answer
80% of subsidiary's stand-alone net income		Answer
Consolidated net income attributable to the parent		Answer
Subsidiary:
20% of subsidiary's stand-alone net income		Answer
Less:	Answer100% AAP amortization80% AAP amortization20% AAP amortization	Answer
		Answer

g. Complete the consolidating entries according to the C-E-A-D-I sequence.

Consolidation Worksheet
Description		Debit	Credit
[C]	Equity income	Answer	Answer
	AnswerProperty, plant and equipment (PPE), netGoodwillOperating expensesEquity incomeConsolidated net income attributable to noncontrolling interestEquity investmentRetained earningsNoncontrolling interest	Answer	Answer
	Dividends	Answer	Answer
	Equity investment	Answer	Answer
	AnswerProperty, plant and equipment (PPE), netGoodwillOperating expensesEquity incomeConsolidated net income attributable to noncontrolling interestEquity investmentRetained earningsNoncontrolling interest	Answer	Answer
[E]	Common stock	Answer	Answer
	APIC	Answer	Answer
	AnswerProperty, plant and equipment (PPE), netGoodwillOperating expensesEquity incomeConsolidated net income attributable to noncontrolling interestEquity investmentRetained earningsNoncontrolling interest	Answer	Answer
	Equity investment	Answer	Answer
	AnswerProperty, plant and equipment (PPE), netGoodwillOperating expensesEquity incomeConsolidated net income attributable to noncontrolling interestEquity investmentRetained earningsNoncontrolling interest	Answer	Answer
[A]	Property, plant and equipment (PPE), net	Answer	Answer
	Customer list	Answer	Answer
	AnswerProperty, plant and equipment (PPE), netGoodwillOperating expensesEquity incomeConsolidated net income attributable to noncontrolling interestEquity investmentRetained earningsNoncontrolling interest	Answer	Answer
	Equity investment	Answer	Answer
	AnswerProperty, plant and equipment (PPE), netGoodwillOperating expensesEquity incomeConsolidated net income attributable to noncontrolling interestEquity investmentRetained earningsNoncontrolling interest	Answer	Answer
[D]	AnswerProperty, plant and equipment (PPE), netGoodwillOperating expensesEquity incomeConsolidated net income attributable to noncontrolling interestEquity investmentRetained earningsNoncontrolling interest	Answer	Answer
	AnswerProperty, plant and equipment (PPE), netGoodwillOperating expensesEquity incomeConsolidated net income attributable to noncontrolling interestEquity investmentRetained earningsNoncontrolling interest	Answer	Answer
	Customer list	Answer	Answer