Consolidation subsequent to date of acquisition-Equity method with noncontrolling interest, AAP, and gain on upstream intercompany equipment sale A parent company acquired its 75% interest in its subsidiary on January 1, 2008. On the acquisition date, the total fair value of the controlling interest and the noncontrolling interest was $350,000 in excess of the book value of the subsidiary's Stockholders' Equity. All of that excess was allocated to a Royalty Agreement, which had a zero book value in the subsidiary's financial statements .e, there is no Goodwill). The Royalty Agreement has a 7 year estimated remaining economic life on the acquisition date. Both companies use straight line depreciation and amortization, with no salvage value In January 2011, the subsidiary sold Equipment to the parent for a cash price of $245.000. The subsidiary acquired the equipment at a cost of $480000 and depreciated the equipment over its 10-year useful using the straight-line method ino salvage value). The subsidiary had depreciated the equipment for 6 years at the time of sale. The parent retained the depreciation policy of the subsidiary and depreciated the equipmen over its remaining 4 year useful life. Following are financial statements of the parent and its subsidiary for the year ended December 31, 2013. The parent uses the equity method to account for its Equity Investment Parent Subsidiary Parent Subsidiary Income statement Balance sheet Sales $3.300.000 1876.000 Ass Cast of goods sold GL433,400 25.000) Cash Gross profe 546400 came des) from subsidiary 64416 Operating expenses 67.000 1227, PP, net $50318 122.640 Equity vestment 300-400 Accounts receivable Invertory 340020 437531 $5.992706 $2,004,032 511500 5951243,272 336,400 7300 481,000 Statement of retained earnings BOY retained earnings Dividends 10Y read earnings $1,812,627 50418 012470 $2203974 $302.220 Long term $197,100 Lbs are dry 122643 Accountab 1752 Other current 1341380 15592 Common stock APC 402220 20140 1500,000 1,100,000 186314 10424 1354218 135,780 2203974 382220 $5,952706 $2.0040 a Disaggregate and document the activity for the 100% Acquisition Accounting Premium (AAP), the controlling interest AAP and the noncontrolling interest AAP. Do not use negative signs with your answers in part a Unamortized AAP 1/1/2008 Unamortized 2008 AAP 2009 Amortization 1/1/2009 Amortization Unamortized AAP Unamortized AAP 2010 1/1/2010 Amortization 1/1/2011 Amortization 1/1/2012 Amortization 1/1/2013 2011 Unamortized AAP Unamortized AAP Unamortized 2013 AAP Amartination 1/1/2014 Controlling interest Ntotraugill g 0 b. Calculate and organize the profits and losses on intercompany transactions and balances Use negative signs with answers that are reductions LASE Downstream Upstream c. Compute the pre-consolidation Equity Investment account beginning and ending balances starting with the stockholders' equity of the binary Use negative signs with answers that are deductions Faulty investment at 1/1/03 Common stock APIC Retained earnings Equity vestment 12/01/13 Common ARC D d. Reconstruct the activity in the parent's pre-consolidation Equity Investment T-account for the year of consolidation Balance at 1/1/13 Equity Investment Net inconte 0 Dividends Upstream equipment profits 0 AAP amortization 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 Use negative signs with answers that are reductions Noncontrolling interest at 1/1/13 Common stock APIC Retained earnings Less D Noncontrolling interest as 12/31/13 Common stock 0 APIC 0 Retained earnings Las 0 Support Dashb f. Independently calculate consolidated net income, controlling interest net income and noncontrolling interest net income. Use negative signs with answers that are reductions Consolidated: Parent's stand-alone net income Subsidiary's stand-alone net income Plus: 100% realized upstream deferred profits Less: 100% AAP amortization Subsidiary's adjusted stand-alone net income Consolidated net income Parent Parent's stand-alone net income 75% Subsidiary's stand-alone net income Plus: 75% realized upstream deferred profits Less: 75% AAP amortization 75% of subsidiary's stand-alone net income Consolidated net income attributable to the parent Subsidiary 25% of subsidiary's stand-alone net income Plus: 25% realized upstream deferred profits Less: 25% AAP amortization Consolidated net income attributable to the NC 0 g. Complete the consolidating entries according to the C-E-A-D-I sequence. [C] Equity income Consolidation Worksheet Description Consolidated net income attributable to noncontrolling interest Dividends Equity investment Noncontrolling interest Common stock [E] APIC Retained earnings Equity investment [A] Royalty agreement Noncontrolling interest Equity investment Noncontrolling interest [D] Operating expenses Royalty agreement [Igain] Equity investment Noncontrolling interest PPE, net [Idep] PPE, net Depreciation expense Debit Credit 0 0 4 0 0 0 0 0 0 4 0 0 0 0 0 0 4 " 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 O 0 0 O 0 0 0 0 0 0