Consolidation subsequent to date of acquisition-upstream intercompany inventory sale- Equity method with noncontrolling interest, AAP, and upstream intercompany inventory sale

Assume that, on January 1, 2007, a parent company acquired an 80% interest in its subsidiary. The total fair value of the controlling and noncontrolling interests was $550,000 over the book value of the subsidiary's Stockholders' Equity on the acquisition date. the parent assigned the excess to the following [A] assets:

Assets	Initial Fair Value	Useful Life (years)
Patent	$300,000	10
Goodwill	250,000	Indefinite
	$550,000

80% of the Goodwill is allocated to the parent. Assume that 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 2012 and 2013:

	2012	2013
Transfer price for inventory sale	$674,000	$733,000
Cost of goods sold	(615,000)	(653,000)
Gross Profit	$59,000	$80,000
% inventory remaining	25%	35%
Gross profit deferred	$14,750	$28,000
EOY receivable/payable	$93,000	$105,000

The inventory not remaining at the end of the year has been sold outside of the controlled group.

The parent and the subsidiary report the following financial statements at December 31, 2013:

	Parent	Subsidiary		Parent	Subsidiary
Income Statement			Balance Sheet
Sales	$6,770,000	$2,521,500	Assets
Cost of Goods Sold	(4,739,000)	(1,511,100)	Cash	$798,240	$699,785
Gross Profit	2,031,000	1,010,400	Accounts Receivable	866,560	584,292
Equity Income	249,872		Inventory	1,313,380	750,513
Operating Expenses	(1,242,600)	(654,810)	Equity Investments	1,849,065
Net Income	$1,038,272	355,590	Property, Plant, and Equipment (PPE), net	6,317,764	1,388,533
				$11,145,009	$3,423,123
Statement of Retained Earnings
BOY Retained Earnings	$3,401,248	$1,301,225	Liabilities and stockholders' equity
Net incomes	1,038,272	355,590	Current liabilities	$972,849	$584,292
Dividends	(199,210)	(35,259)	Long-term liabilities	4,000,000	839,500
EOY retained earnings	$4,240,310	$1,621,556	Common stock	1,106,895	167,900
			APIC	824,955	209,875
			Retained Earnings	4,240,310	1,621,556
				$11,145,009	$3,423,123

Answers:

Beg. Bal Noncontrolling interest's equity	?
Stockholders' equity	?
Deferred gain	?
[A] Assets	?
Income, net of amort. of AAP	?
Dividends	?
EOY Noncontrolling interest	?

Complete the consolidating entries according to the C-E-A-D-I sequence.

	Description	Debit	Credit
[C]	Equity income	?
	Consolidated net income attributable to noncontrolling interest	?
	Dividends		?
	Equity Investment		?
	Noncontrolling interest		?
	Eliminates the change in the investment account of AAP adjusted changes in SE(S).
[E]	Common stock (S) - @BOY	?
	APIC (S) - @BOY	?
	Retained earnings (S) @BOY	?
	Equity investment		?
	Noncontrolling interest		?
	Eliminates the beginning balance in SE(S) by eliminating the BV portion of the beginning investment account
[A]	PPE, net - @BOY (100% AAP)	?
	Patenet, net @BOT (100%AAP)	?
	GW @ BOY (100% AAP)	?
	Equity investment - @BOY (AAP)		?
	Noncontrolling interest		?
	Allocates beginning-of-year 100% AAP to the controlling and noncontrolling interests by eliminating the remaining investment account and establishing the BOY AAP for nci%.
[D]	Operating expenses (for 100% AAP amort.)	?
	PPE, net (for 100% AAP amort.)		?
	Patent, net (for 100% AAP amort)		?
	Recognition of dep and amort of AAP assets.
[l...]	Equity investment	?
	Noncontrolling interest @BOY	?
	Cost of goods sold		?
	Recognition of deferred gain on inventory sale and proration between parent and subsidiary
[l...]	Sales	?
	Cost of goods sold		?
	Elimination of 100% of all intercompany transactions
[l...]	Cost of goods sold	?
	Inventory		?
	Deferral of gross profit on this year inventory sales
[l...]	Accounts payable	?
	Accounts receivable		?