Consolidation worksheet for gain on constructive retirement of subsidiary's debt with no AAPCost method Assume that a Parent company acquires a 75 percent interest in its Subsidiary on January 1, 2018 On the date of acquisition, the fair value of the 75 percent controlling interest was $480,000 and the fair value of the 25 percent noncontrolling interest was $160,000 On January 1, 2018, the book value of net assets equaled $640,000 and the fair value of the identifiable net assets equaled the book value of identifiable net assets (i e , there was no AAP or Goodwill) On January 1, 2018, the retained earnings of the subsidiary was $120,000 On December 31, 2019, the Subsidiary company issued $600,000 (face) 6 percent, five year bonds to an unaffiliated company for $612,000 The bonds pay interest annually on December 31, and the bond premium is amortized using the straight line method This results in annual bond payable premium amortization equal to $2,400 per year The following schedule provides the bond amortization schedule from the initial issuance date Year Cash Payment Amortization of Premium Interest Expense Carrying Amount Dec 31, 2019 $612,000 Dec 31, 2020 $36,000 $2,400 $33,600 609,600 Dec 31, 2021 36,000 2,400 33,600 607,200 Dec 31, 2022 36,000 2,400 33,600 604,800 Dec 31, 2023 36,000 2,400 33,600 602,400 Dec 31, 2024 36,000 2,400 33,600 600,000 On December 31, 2021, the Parent paid $588,000 to purchase all of the outstanding Subsidiary company bonds The bond discount is amortized using the straight line method, which results in annual bond investment discount amortization equal to $4,000 per year The following schedule provides the bond amortization schedule for the Parent's bond investment Year Cash Payment Amortization of Discount Interest Income Carrying Amount Dec 31, 2021 $588,000 Dec 31, 2022 $36,000 $4,000 $40,000 592,000 Dec 31, 2023 36,000 4,000 40,000 596,000 Dec 31, 2024 36,000 4,000 40,000 600,000 The parent uses the cost method of pre consolidation investment bookkeeping The Parent and the Subsidiary report the following financial statements for the year ended December 31, 2022

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Consolidation worksheet for gain on constructive retirement of subsidiary's debt with no AAPCost method Assume that a Parent company acquires a 75 percent interest in

Consolidation worksheet for gain on constructive retirement of subsidiary's debt with no AAPCost method Assume that a Parent company acquires a 75 percent interest in its Subsidiary on January 1, 2018. On the date of acquisition, the fair value of the 75 percent controlling interest was $480,000 and the fair value of the 25 percent noncontrolling interest was $160,000. On January 1, 2018, the book value of net assets equaled $640,000 and the fair value of the identifiable net assets equaled the book value of identifiable net assets (i.e., there was no AAP or Goodwill). On January 1, 2018, the retained earnings of the subsidiary was $120,000.

On December 31, 2019, the Subsidiary company issued $600,000 (face) 6 percent, five-year bonds to an unaffiliated company for $612,000. The bonds pay interest annually on December 31, and the bond premium is amortized using the straight line method. This results in annual bond-payable premium amortization equal to $2,400 per year. The following schedule provides the bond-amortization schedule from the initial issuance date.

Year	Cash Payment	Amortization of Premium	Interest Expense	Carrying Amount
Dec. 31, 2019				$612,000
Dec. 31, 2020	$36,000	$2,400	$33,600	609,600
Dec. 31, 2021	36,000	2,400	33,600	607,200
Dec. 31, 2022	36,000	2,400	33,600	604,800
Dec. 31, 2023	36,000	2,400	33,600	602,400
Dec. 31, 2024	36,000	2,400	33,600	600,000

On December 31, 2021, the Parent paid $588,000 to purchase all of the outstanding Subsidiary company bonds. The bond discount is amortized using the straight-line method, which results in annual bond-investment discount amortization equal to $4,000 per year. The following schedule provides the bond-amortization schedule for the Parent's bond investment.

Year	Cash Payment	Amortization of Discount	Interest Income	Carrying Amount
Dec. 31, 2021				$588,000
Dec. 31, 2022	$36,000	$4,000	$40,000	592,000
Dec. 31, 2023	36,000	4,000	40,000	596,000
Dec. 31, 2024	36,000	4,000	40,000	600,000

The parent uses the cost method of pre-consolidation investment bookkeeping. The Parent and the Subsidiary report the following financial statements for the year ended December 31, 2022: