Consolidation subsequent to date of acquisition - Equity method with noncontrolling interest and AAP Assume that, on January 1, 2013, a parent company acquired a 90% interest in its subsidiary. The total fair value of the controlling and noncontrolling interests was $480,000 over the book value of the subsidiarys Stockholders Equity on the acquisition date. The parent assigned the excess fair value 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 $160,000 20 Patent 80,000 10 Customer list 40,000 10 Goodwill 200,000 Indefinite $480,000 90% of the Goodwill is allocated to the parent. The parent and the subsidiary report the following financial statements at December 31, 2016: Parent Subsidiary Parent Subsidiary Income statement: Balance sheet: Sales $6,800,000 $880,000 Cash $320,000 $228,000 Cost of goods sold (5,200,000) (528,000) Accounts receivable 480,000 200,000 Gross profit 1,600,000 352,000 Inventory 720,000 264,000 Income (loss) from subsidiary 82,800 Equity investment 982,800 Operating expenses (1,280,000) (240,000) Property, plant and equipment (PPE), net 1,600,000 600,000 Net income $402,800 112,000 $4,102,800 $1,292,000 Statement of retained earnings: BOY retained earnings $580,000 $468,000 Liabilities and stockholders equity Net income 402,800 112,000 Current liabilities $720,000 $200,000 Dividends (160,000) (16,000) Long-term liabilities 1,600,000 400,000 EOY retained earnings $822,800 $564,000 Common stock 320,000 56,000 APIC 640,000 72,000 Retained earnings 822,800 564,000 $4,102,800 $1,292,000 a. Disaggregate and document the activity for the 100% Acquisition Accounting Premium (AAP), the controlling interest AAP and the noncontrolling interest AAP. Do not enter any answers as negative numbers. Unamortized Unamortized Unamortized Unamortized Unamortized AAP 2013 AAP 2014 AAP 2015 AAP 2016 AAP 1/1/2013 Amortization 12/31/2013 Amortization 12/31/2014 Amortization 12/31/2015 Amortization 12/31/2016 100% AAP Property, plant and equipment (PPE), net Answer Answer Answer Answer Answer Answer Answer Answer Answer Patent Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Goodwill Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Parent (90%): Property, plant and equipment (PPE), net Answer Answer Answer Answer Answer Answer Answer Answer Answer Patent Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Goodwill Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Subsidiary (10%): Property, plant and equipment (PPE), net Answer Answer Answer Answer Answer Answer Answer Answer Answer Patent Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Goodwill Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer b. Calculate and organize the profits and losses on intercompany transactions and balances. Downstream Upstream Jan. 1, 2016 Answer Answer Answer Dec. 31, 2016 Answer Answer Answer 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 1/1/16: 90% x book value of the net assets of subsidiary Answer Answer Answer Answer Equity investment at 12/31/16: 90% x book value of the net assets of subsidiary Answer Answer Answer Answer d. Reconstruct the activity in the parents pre-consolidation Equity Investment T-account for the year of consolidation. Round answers to the nearest whole number. Equity Investment Balance at 1/1/16 Answer Answer Answer Answer Answer Dividends Answer Answer Answer Balance at 12/31/13 Answer Answer 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 1/1/16: 10% of book value of the net assets of subsidiary Answer Answer Answer NCI Answer Noncontrolling interest at 12/31/16: 10% of book value of the net assets of subsidiary Answer Answer Answer NCI 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 deductions. Consolidated: Parent's stand-alone net income Answer Subsidiary's stand-alone net income Answer Less: Answer Answer Consolidated net income Answer Parent: Parent's stand-alone net income Answer 90% of subsidiary's stand-alone net income Answer Less: Answer Answer Consolidated net income attributable to the controlling interest Answer Subsidiary: 10% of subsidiary's stand-alone net income Answer Less: Answer Answer Consolidated net income attributable to the noncontrolling interest Answer g. Complete the consolidating entries according to the C-E-A-D-I sequence and complete the consolidation worksheet. Consolidation Worksheet Description Debit Credit [C] Equity income Answer Answer Answer Answer Answer Dividends Answer Answer Equity investment Answer Answer Answer Answer Answer [E] Common stock Answer Answer APIC Answer Answer Answer Answer Answer Equity investment Answer Answer Answer Answer Answer [A] Property, plant and equipment (PPE), net Answer Answer Patent Answer Answer Customer list Answer Answer Answer Answer Answer Equity investment Answer Answer Answer Answer Answer [D] Answer Answer Answer Answer Answer Answer Patent Answer Answer Customer list Answer Answer