Consolidation subsequent to date of acquisition-Equity method with noncontrolling interest and AAP Assume, on January 1, 2015, a parent company acquired a 90% interest in its subsidiary. The total fair value of the controlling and noncontrolling interest was $445,000 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 Original Amount Original Useful Life 10 years 95,000 210,000 $445,000 5 years Indefinite Property, plant, and equipment $140,000 Customer list Goodwill 90% of the Goodwill is allocated to the parent. The parent and the subsidiary report the following pre-consolidation financial statements at December 31, 2019: Parent Subsidiary Parent Subsidiary Income statement: Sales Balance sheet: $5,760,000 1,500,000 Assets Cost of goods sold Gross profit Equity income (4,000,000) 1,760,000 96,300 (960,000) Cash $ 400,000 Operating expenses (1,120,000) 540,000 Accounts receivable Inventory (400,000) Equity investment 752,000 $60,000 200,000 960,000 440,000 882,000 Net income 736,300 140,000 Property, plant and equipment, net Statement of retained earnings: 2,240,000 $5,234,000 $1,420,000 720,000 Beginning retained earnings: 1,377,700 Net income Dividends Ending retained earnings 736,300 (160,000) (40,000) Long-term liabilities $1,954,000 $500,000 Common stock 400,000 Liabilities and stockholders' equity 140,000 Accrued liabilities 800,000 320,000 1,600,000 400,000 160,000 80,000 APIC 720,000 120,000 Retained earnings 1,954,000 500,000 $5,234,000 $1,420,000 01/15/15 12/31/15 a. Disaggregate and document the activity for the 100% Acquisition Accounting Premium (AAP), the controlling interest AAP and the noncontrolling interest AAP. Unamort AAP 2015 Amort Unamort AAP 2016 Amort Unamort AAP 12/31/16 2017 Amort Unamort AAP 12/31/17 2018 Amort Unamort AAP 12/31/18 Unamort AAP 12/31/19 2019 Amort 100% AAP PPE, net $140,000 $ Customer list Goodwill 95,000 210,000 14,000 19,000 $ 126,000 76,000 $ 14,000 $ 19,000 112,000 57,000 $ 210,000 210,000 14,000 $ 98,000 19,000 38,000 210,000 $ 14,000 $ 84,000 $ 19,000 14,000 $ 70,000 19,000 210,000 19,000 0 $445,000 $ 33,000 $ 412,000 $ 33,000 $ 379,000 33,000 $ 346,000 33,000 $ 313,000 $ 33,000 210,000 280,000 Parent (p%): PPE, net $ 126,000 Customer list 85,500 12,600 $ 17,100 Goodwill 189,000 0 113,400 68,400 189,000 $ 12,600 17,100 100,800 $ 51,300 189,000 12,600 17,100 88,200 34,200 12,600 $ 75,600 17,100 17,100 12,600 $ 63,000 17,100 0 189,000 189,000 0 189,000 $ 400,500 $ 29,700 $ 370,800 $ 29,700 $ 341,100 $ 29,700 $ 311,400 $ 29,700 $ 281,700 $ 29,700 $ 252,000 Subsidiary (nci%): PPE, net Customer list $ 14,000 $ Goodwill 9,500 21,000 1,400 1,900 12,600 7,600 21,000 1,400 1,900 $ 11,200 5,700 21,000 1,400 $ 1,900 9,800 $ 3,800 21,000 1,400 $ 1,900 8,400 $ 1,900 21,000 1,400 7,000 1,900 21,000 $ 44,500 $ 3,300 $ 41,200 $ 3,300 $ 37,900 $ 3,300 $ 34,600 $ 3,300 $ 31,300 $ 3,300 28,000 b. Calculate and organize the profits and losses on intercompany transactions and balances. (No intercompany transactions) c. Compute the pre-consolidation Equity Investment account beginning and ending balances starting with the stockholders' equity of the subsidiary. Equity investment account at 1/1/19 p% book value of subsidiary's net assets $ Unamortized p% AAP 0 x 281,700 0 x Equity investment account at 12/31/19 p% book value of subsidiary's net assets $ Unamortized p% AAP 0 x 252,000 0 x d. Reconstruct the activity in the parent's pre-consolidation Equity Investment T-account for the year of consolidation. Equity Investment 0 x 0 x 0 x 0 x 0 x e. Independently compute the owners' equity attributable to the noncontrolling interest beginning and ending balances starting with the owners' equity of the subsidiary. Noncontrolling interests at 1/1/19 nci% book value of subsidiary's net assets $ Unamortized nci% AAP Noncontrolling interests at 12/31/19 0 x 31,300 0 nci% book value of subsidiary's net assets $ Unamortized nci% AAP 0 x 28,000 0 x f. Independently calculate consolidated net income, controlling interest net income and noncontrolling interest net income. Note:Use a negative sign with your answer to indicate a reduction to net income. Parent's stand-alone net income $ 0 x Subsidiary's stand-alone net income 100% AAP amortization Consolidated net income 140,000 (33,000) $ 0 x Parent's stand-alone net income $ 0 x p% of subsidiary's stand-alone net income 126,000 p% AAP amortization (29,700) Consolidated net income attributable to the controlling interest $ 0 x nci% of subsidiary's stand-alone net income $ 14,000 nci% AAP amortization (3,300) Consolidated net income attributable to the noncontrolling interest $ 0 x