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
Property, plant, and equipment	$ 140,000	10 years
Customer list	95,000	5 years
Goodwill	210,000	Indefinite
	$ 445,000

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:			Balance sheet:
Sales	$5,760,000	1,500,000	Assets
Cost of goods sold	(4,000,000)	(960,000)	Cash	$ 400,000	$ 60,000
Gross profit	1,760,000	540,000	Accounts receivable	752,000	200,000
Equity income	96,300		Inventory	960,000	440,000
Operating expenses	(1,120,000)	(400,000)	Equity investment	882,000
Net income	736,300	140,000	Property, plant and equipment, net	2,240,000	720,000
Statement of retained earnings:				$ 5,234,000	$ 1,420,000
Beginning retained earnings:	1,377,700	400,000	Liabilities and stockholders' equity
Net income	736,300	140,000	Accrued liabilities	800,000	320,000
Dividends	(160,000)	(40,000)	Long-term liabilities	1,600,000	400,000
Ending retained earnings	$1,954,000	$ 500,000	Common stock	160,000	80,000
			APIC	720,000	120,000
			Retained earnings	1,954,000	500,000
				$ 5,234,000	$1,420,000

a. Disaggregate and document the activity for the 100% Acquisition Accounting Premium (AAP), the controlling interest AAP and the noncontrolling interest AAP.

100% AAP	Unamort AAP 01/15/15	2015 Amort	Unamort AAP 12/31/15	2016 Amort	Unamort AAP 12/31/16	2017 Amort	Unamort AAP 12/31/17	2018 Amort	Unamort AAP 12/31/18	2019 Amort	Unamort AAP 12/31/19
PPE, net	$ 140,000
Customer list	95,000
Goodwill	210,000
	$445,000
Parent (p%):
PPE, net
Customer list
Goodwill
Subsidiary (nci%):
PPE, net
Customer list
Goodwill

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

Equity investment account at 12/31/19
p% book value of subsidiary's net assets
Unamortized p% AAP

d. Reconstruct the activity in the parent's pre-consolidation Equity Investment T-account for the year of consolidation.

Noncontrolling interests at 1/1/19
nci% book value of subsidiary's net assets
Unamortized nci% AAP

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 12/31/19
nci% book value of subsidiary's net assets
Unamortized nci% AAP

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
Subsidiary's stand-alone net income
100% AAP amortization
Consolidated net income
Parent's stand-alone net income
p% of subsidiary's stand-alone net income
p% AAP amortization
Consolidated net income attributable to the controlling interest
nci% of subsidiary's stand-alone net income
nci% AAP amortization
Consolidated net income attributable to the noncontrolling interest

g. Complete the complete the consolidation worksheet.
Note: Use negative signs with your answers in the Consolidated column when appropriate (Cost of goods sold, Operating expenses and Dividends).

			Consolidation Entries
	Parent	Subsidiary		Dr	Cr		Consolidated
Income Statement:
Sales	$5,760,000	$1,500,000
Cost of Goods sold	(4,000,000)	(960,000)
Gross profit	1,760,000	540,000
Income (loss) from subsidiary	96,300		[C]
Operating expenses	(1,120,000)	(400,000)	[D]
Net Income	$736,300	$140,000
Consolidated NI atrib to NCI			[C]
Consolidated NI attrib to CI
Statement of Ret Earnings:
BOY retained earnings	$1,377,700	$400,000	[E]
Net income	736,300	140,000
Dividends	(160,000)	(40,000)				[C]
EOY retained earnings	$1,954,000	$500,000
Balance Sheet:
Cash	$400,000	$60,000
Accounts receivable	752,000	200,000
Inventory	960,000	440,000
Equity investment	882,000					[C]
						[E]
						[A]
PPE, net	2,240,000	720,000	[A]			[D]
Customer List			[A]			[D]
Goodwill			[A]
	$5,234,000	$1,420,000
Current liabilities	$800,000	$320,000
Long-term liabilities	1,600,000	400,000
Common stock	160,000	80,000	[E]
APIC	720,000	120,000	[E]
Retained earnings	1,954,000	500,000
Noncontrolling interest						[C]
						[E]
						[A]
	$5,234,000	$1,420,000