Consolidation subsequent to date of acquisition--Equity method with noncontrolling interest, AAP, and upstream intercompany inventory sale Assume, on January 1, 2013, a parent company acquired an 80% interest in its subsidiary, The total fair value of the controlling and noncontrolling interests was $480,000 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 Patent $180,000 10 years Goodwill 300.000 indefinte 5480.000 80% of the Goodwill is allocated to the parent. Assume the subsidiary sells inventory to the parent (upstreamwhich includes that inventory in products that it ultimately sells to customers outside of the controlled group. You have compiled the following data as of 2018 and 2019: 2018 2019 Transfer price for inventory sale 5500.000 5500.000 Cost of goods sold 1420.000) (450.000 Gross proft 580.000 $150.000 Inventory remaining 399 25 Gross profit deferred $28.000 $37.500 EOV receivable payable 550.000 5140.000 The inventory not remaining at the end of the year has been sold outside of the controlled group. The parent uses the equity method of pre-consolidation investment bookkeeping. The parent and the subsidiary report the following pre-consolidation financial statements at December 31, 2019 Parent Subsidiary Parent Subsidiary Income statement: Balance sheet: $6,700,000 $2.500.000 Cash $500.000 $400.000 Cost of goods sold (4500.000) (1.500.000) Accounts recevable 700.000 600.000 Gross proft 2.200,000 1,000,000 inventory 900.000 300.000 income (los) from Subsidiary 138.000 Eouity investment 1373.200 Operating expenses (2.000.000) (300.000) Property, plant and equipment (PPE).net 4.000.000 1.000.000 Net Income 5338.000 5200.000 57.473.200 52.000.000 Statement of retained earnings: BOY retained earnings 52.035.200 $940.000 Current lates $800.000 $500.000 Net income 338.000 200.000 Long-term abilities 3.000.000 900.000 Dividends 200.000) 140.000) Common stock 500,000 100.000 EOV retained earnings 52. 173.200 51.100.000 APIC 1.000.000 200.000 Retained earning 2. 173.200 1.100.000 57.473.200 52.800.000 a. Disaggregate and document the activity for the 100% Acquisition Accounting Premium (AAP), the controlling interest AAP and the noncontrolling interest AAP. (Complete for the first four years only.) Unamortized Unamortized Unamortired Unamortired AAP 2013 AAP 2014 AAP 2015 AAP 2016 11/2013 Amortization 12/31/2013 Amortization 12/31/2014 Amortization 12/31/2015 Amortization 100 Patent Good BO Patent Goodwill 204 Patent Goodwill b. Calculate and organize the profits and losses on intercompany transactions and balances, Downstream Upstream Intercompany profit on 1/1/19 Intercompany profit on 12/31/19 c. Compute the pre-consolidation Equity Investment account beginning and ending balances starting with the stockholders' equity of the subsidiary. Use a negative sign with your answer to indicate a reduction to net income. Equity investment at 1/1/19: 304 x book value of the net assets of subsidiary Add Equity investment at 12/31/19: 80% book value of the net assets of subsidiary Add: Less d. Reconstruct the activity in the parent's pre-consolidation Equity Investment Taccount for the year of consolidation Equity Investment Equity investment at 1/1/19 Net income Didends AAD amortization . Equity investment at 12/31/19 Indiennent e Independently compute the owners' equity attributable to the noncontrolling interest beginning and ending balances starting with the owners' equity of the subsidiary Use a negative sign with your answer to indicate a reduction to net income. Noncontrolling interest at 11/19: 20% of book value of the net assets of subsidiary Add: Less . . Noncontrolling interest 12/31/19 20% of book value of the nat assets of subsidiary Add . f. Independently calculate consolidated net income, controlling interest net income and noncontrolling interest net income. Use a negative sign with your answer to indicate a reduction to net income. Parent's stand-alone net income Subsidiary's stand-alone net income Plus: Less: Less: 100% AAP amortization Consolidated net income Parent's stand-alone net income 80% Subsidiary's stand-alone net income Plus . Less: Less: 80% AAP amortization Consolidated net income attributable to the controlling interest 20% of subsidiary's stand-alone net income Plus: . Less Less: 20% AAP amortization Consolidated net income attributable to the noncontrolling interest g. Complete the consolidating entries according to the C-E-A-D-I sequence. Consolidation Worksheet Description Debit [C] Equity income Credit . Dividends Equity investment [E] Common stock APIC Equity investment . [A] Patent Equity investment [D] [lcogs] Equity investment 0 [lsales] (4) [lcogs] [pay] ( Consolidation subsequent to date of acquisition-Equity method with noncontrolling Interest, AAP, and upstream Intercompany inventory sale Assume, on January 1, 2013. a parent company acquired an o interest in its subsidiary. The total fair value of the controlling and noncontrolling interests was 5480.000 over the book value of the subsidiary Stockholders' Equity on the acquisition date. The parent assigned the excess to the following Alasses: 10 year JA Asset initial Fair value Unul Life 5180.000 Condu 300.000 inden 000 weddins 80% of the Goodwill is allocated to the parent. Assume the subsidiary sells inventory to the parent (upstream) which includes that inventory in products that it ultimately sells to customers outside of the controlled group. You have compiled the following data as of 2018 and 2019: 2018 Transfer price for inventory S500.000 $600,000 Cast of goods sold H20.000 100.000 S. 5150,000 Gross profit deferred EOV cable SO The inventory not remaining at the end of the year has been sold outside of the controlled group. The parent uses the equity method of pre-consolidation investment bookkeeping The parent and the subsidiary report the following pre-consolidation financial statements at December 31, 2019 Parent Subsidiary Parent Subsidiary Incoment Balance sheet 86 V W W DO CHT $500.000 $400.000 Cost of goods sold 500.000 1.500.000 Accounts receivable 700.000 500.000 Gross pro 2.200.000 100.000 inventory 900,000 Income loss from subsidiary 138.000 Fouity investment 1,373.200 Operating expenses 12.500.000 800.000 Property plant and met 4,000,000 10000 Net income 5200.000 Statement of retained earnings BOY retained in 52.035.200 $940.000 Current les 5800.000 $500.000 Net income 338.000 200.000 Long termalities 1000000 900,000 Dividends 000000 140.000 Common stock 500.000 100.000 Ondeamines 52173 200 51.100.000 APC Retained 2.173.200 1.100.000 $74732000.000 soddns a. Disaggregate and document the activity for the 100% Acquisition Accounting Premium (AAP), the controlling interest AAP and the noncontrolling interest AAP. (Complete for the first four years only) Unamortized Unamartired Unamortized AAP 2013 Unamortized AAP 2014 AAP AAP 2016 11/2013 Amortization 12/31/2013 Amortization 12/31/2014 Amortization 12/31/2015 Amortisation 150 0 0 0 0 0 0 Go 0 0 0 0 0 D 0 0 0 0 0 0 0 Pa Good 0 0 0 0 0 0 0 0 O 0 0 0 0 . 0 0 0 0 . Good 0 0 0 0 0 0 0 0 0 0 0 0 b. Calculate and organize the profits and losses on intercompany transactions and balances Downstream Upstream Intercompany profion 1/1/19 Intercompany profton 12/31/19 c. Compute the pre-consolidation Equity Investment account beginning and ending balances starting with the stockholders equity of the subsidiary. Use a negative sign with your answer to indicate a reduction to net income Equity investment Boxbook value of the metasses of subsidiary Add 0 LE . . 0 0 Equity investment at 12/31/19 SO book value of the net assets of subsidiary Add Len 0 d. Reconstruct the activity in the parent's pre-consolidation Equity Investment T-account for the year of consolidation Equity Investment tement 0 0 Equity vestment at 11/19 e. Independently compute the owners' equity attributable to the noncontrolling interest beginning and ending balances starting with the owners' equity of the subsidiary. Use a negative sign with your answer to indicate a reduction to net income. Noncontrolling interest 111/19 20% of book value of the net assets of subsidiary 0 Add Less 0 0 Noncontrolling interest at 12/31/19 20% of book value of the net assets of subsidiary 0 0 . 0 f. Independently calculate consolidated net income, controlling interest net income and noncontrolling interest net income. Use a negative sign with your answer to indicate a reduction to net income. Parents stand-alone net income 0 Subsidiary's standalone net income Plus 0 . Less: 100% AAP amortization 0 Consolidated net income 0 Parent's stand-alone net income 0 80% Subsidiary's standalone net income 0 Plus 0 Less 0 Less: 0 AAP amortization 0 Consolidated net income attributable to the controlling interest 20% of subsidiary's standalone net income Plus D . Less: 20% AP amortization Consolidated net income tributable to the necontrolling interest Debit Credit 8. Complete the consolidating entries according to the C-E-A-D-I sequence. Consolidation Worksheet Description Equity income 0 Dividends Equity investment 0 [C 0 0 0 0 0 0 0 0 Common stock APIC 0 0 0 0 0 0 Equity Investment 0 0 0 CA Patent 0 0 0 0 0 Equity investment 0 0 [D] 0 0 0 0 O [lcogs] Equity Investment 0 O 0 0 0 0 [sales) O 0 0 0 [lcogs 0 . O 0 sales 0 0 0 . 0 cogs 0 0 0 . 0 Consolidation subsequent to date of acquisition--Equity method with noncontrolling interest, AAP, and upstream intercompany inventory sale Assume, on January 1, 2013, a parent company acquired an 80% interest in its subsidiary, The total fair value of the controlling and noncontrolling interests was $480,000 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 Patent $180,000 10 years Goodwill 300.000 indefinte 5480.000 80% of the Goodwill is allocated to the parent. Assume the subsidiary sells inventory to the parent (upstreamwhich includes that inventory in products that it ultimately sells to customers outside of the controlled group. You have compiled the following data as of 2018 and 2019: 2018 2019 Transfer price for inventory sale 5500.000 5500.000 Cost of goods sold 1420.000) (450.000 Gross proft 580.000 $150.000 Inventory remaining 399 25 Gross profit deferred $28.000 $37.500 EOV receivable payable 550.000 5140.000 The inventory not remaining at the end of the year has been sold outside of the controlled group. The parent uses the equity method of pre-consolidation investment bookkeeping. The parent and the subsidiary report the following pre-consolidation financial statements at December 31, 2019 Parent Subsidiary Parent Subsidiary Income statement: Balance sheet: $6,700,000 $2.500.000 Cash $500.000 $400.000 Cost of goods sold (4500.000) (1.500.000) Accounts recevable 700.000 600.000 Gross proft 2.200,000 1,000,000 inventory 900.000 300.000 income (los) from Subsidiary 138.000 Eouity investment 1373.200 Operating expenses (2.000.000) (300.000) Property, plant and equipment (PPE).net 4.000.000 1.000.000 Net Income 5338.000 5200.000 57.473.200 52.000.000 Statement of retained earnings: BOY retained earnings 52.035.200 $940.000 Current lates $800.000 $500.000 Net income 338.000 200.000 Long-term abilities 3.000.000 900.000 Dividends 200.000) 140.000) Common stock 500,000 100.000 EOV retained earnings 52. 173.200 51.100.000 APIC 1.000.000 200.000 Retained earning 2. 173.200 1.100.000 57.473.200 52.800.000 a. Disaggregate and document the activity for the 100% Acquisition Accounting Premium (AAP), the controlling interest AAP and the noncontrolling interest AAP. (Complete for the first four years only.) Unamortized Unamortized Unamortired Unamortired AAP 2013 AAP 2014 AAP 2015 AAP 2016 11/2013 Amortization 12/31/2013 Amortization 12/31/2014 Amortization 12/31/2015 Amortization 100 Patent Good BO Patent Goodwill 204 Patent Goodwill b. Calculate and organize the profits and losses on intercompany transactions and balances, Downstream Upstream Intercompany profit on 1/1/19 Intercompany profit on 12/31/19 c. Compute the pre-consolidation Equity Investment account beginning and ending balances starting with the stockholders' equity of the subsidiary. Use a negative sign with your answer to indicate a reduction to net income. Equity investment at 1/1/19: 304 x book value of the net assets of subsidiary Add Equity investment at 12/31/19: 80% book value of the net assets of subsidiary Add: Less d. Reconstruct the activity in the parent's pre-consolidation Equity Investment Taccount for the year of consolidation Equity Investment Equity investment at 1/1/19 Net income Didends AAD amortization . Equity investment at 12/31/19 Indiennent e Independently compute the owners' equity attributable to the noncontrolling interest beginning and ending balances starting with the owners' equity of the subsidiary Use a negative sign with your answer to indicate a reduction to net income. Noncontrolling interest at 11/19: 20% of book value of the net assets of subsidiary Add: Less . . Noncontrolling interest 12/31/19 20% of book value of the nat assets of subsidiary Add . f. Independently calculate consolidated net income, controlling interest net income and noncontrolling interest net income. Use a negative sign with your answer to indicate a reduction to net income. Parent's stand-alone net income Subsidiary's stand-alone net income Plus: Less: Less: 100% AAP amortization Consolidated net income Parent's stand-alone net income 80% Subsidiary's stand-alone net income Plus . Less: Less: 80% AAP amortization Consolidated net income attributable to the controlling interest 20% of subsidiary's stand-alone net income Plus: . Less Less: 20% AAP amortization Consolidated net income attributable to the noncontrolling interest g. Complete the consolidating entries according to the C-E-A-D-I sequence. Consolidation Worksheet Description Debit [C] Equity income Credit . Dividends Equity investment [E] Common stock APIC Equity investment . [A] Patent Equity investment [D] [lcogs] Equity investment 0 [lsales] (4) [lcogs] [pay] ( Consolidation subsequent to date of acquisition-Equity method with noncontrolling Interest, AAP, and upstream Intercompany inventory sale Assume, on January 1, 2013. a parent company acquired an o interest in its subsidiary. The total fair value of the controlling and noncontrolling interests was 5480.000 over the book value of the subsidiary Stockholders' Equity on the acquisition date. The parent assigned the excess to the following Alasses: 10 year JA Asset initial Fair value Unul Life 5180.000 Condu 300.000 inden 000 weddins 80% of the Goodwill is allocated to the parent. Assume the subsidiary sells inventory to the parent (upstream) which includes that inventory in products that it ultimately sells to customers outside of the controlled group. You have compiled the following data as of 2018 and 2019: 2018 Transfer price for inventory S500.000 $600,000 Cast of goods sold H20.000 100.000 S. 5150,000 Gross profit deferred EOV cable SO The inventory not remaining at the end of the year has been sold outside of the controlled group. The parent uses the equity method of pre-consolidation investment bookkeeping The parent and the subsidiary report the following pre-consolidation financial statements at December 31, 2019 Parent Subsidiary Parent Subsidiary Incoment Balance sheet 86 V W W DO CHT $500.000 $400.000 Cost of goods sold 500.000 1.500.000 Accounts receivable 700.000 500.000 Gross pro 2.200.000 100.000 inventory 900,000 Income loss from subsidiary 138.000 Fouity investment 1,373.200 Operating expenses 12.500.000 800.000 Property plant and met 4,000,000 10000 Net income 5200.000 Statement of retained earnings BOY retained in 52.035.200 $940.000 Current les 5800.000 $500.000 Net income 338.000 200.000 Long termalities 1000000 900,000 Dividends 000000 140.000 Common stock 500.000 100.000 Ondeamines 52173 200 51.100.000 APC Retained 2.173.200 1.100.000 $74732000.000 soddns a. Disaggregate and document the activity for the 100% Acquisition Accounting Premium (AAP), the controlling interest AAP and the noncontrolling interest AAP. (Complete for the first four years only) Unamortized Unamartired Unamortized AAP 2013 Unamortized AAP 2014 AAP AAP 2016 11/2013 Amortization 12/31/2013 Amortization 12/31/2014 Amortization 12/31/2015 Amortisation 150 0 0 0 0 0 0 Go 0 0 0 0 0 D 0 0 0 0 0 0 0 Pa Good 0 0 0 0 0 0 0 0 O 0 0 0 0 . 0 0 0 0 . Good 0 0 0 0 0 0 0 0 0 0 0 0 b. Calculate and organize the profits and losses on intercompany transactions and balances Downstream Upstream Intercompany profion 1/1/19 Intercompany profton 12/31/19 c. Compute the pre-consolidation Equity Investment account beginning and ending balances starting with the stockholders equity of the subsidiary. Use a negative sign with your answer to indicate a reduction to net income Equity investment Boxbook value of the metasses of subsidiary Add 0 LE . . 0 0 Equity investment at 12/31/19 SO book value of the net assets of subsidiary Add Len 0 d. Reconstruct the activity in the parent's pre-consolidation Equity Investment T-account for the year of consolidation Equity Investment tement 0 0 Equity vestment at 11/19 e. Independently compute the owners' equity attributable to the noncontrolling interest beginning and ending balances starting with the owners' equity of the subsidiary. Use a negative sign with your answer to indicate a reduction to net income. Noncontrolling interest 111/19 20% of book value of the net assets of subsidiary 0 Add Less 0 0 Noncontrolling interest at 12/31/19 20% of book value of the net assets of subsidiary 0 0 . 0 f. Independently calculate consolidated net income, controlling interest net income and noncontrolling interest net income. Use a negative sign with your answer to indicate a reduction to net income. Parents stand-alone net income 0 Subsidiary's standalone net income Plus 0 . Less: 100% AAP amortization 0 Consolidated net income 0 Parent's stand-alone net income 0 80% Subsidiary's standalone net income 0 Plus 0 Less 0 Less: 0 AAP amortization 0 Consolidated net income attributable to the controlling interest 20% of subsidiary's standalone net income Plus D . Less: 20% AP amortization Consolidated net income tributable to the necontrolling interest Debit Credit 8. Complete the consolidating entries according to the C-E-A-D-I sequence. Consolidation Worksheet Description Equity income 0 Dividends Equity investment 0 [C 0 0 0 0 0 0 0 0 Common stock APIC 0 0 0 0 0 0 Equity Investment 0 0 0 CA Patent 0 0 0 0 0 Equity investment 0 0 [D] 0 0 0 0 O [lcogs] Equity Investment 0 O 0 0 0 0 [sales) O 0 0 0 [lcogs 0 . O 0 sales 0 0 0 . 0 cogs 0 0 0 . 0