Consolidation worksheet for gain on constructive retirement of subsidiarys 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 Parents 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:

				Parent		Subsidiary								Parent		Subsidiary
Income statement									Balance sheet
Sales				$5,200,000		$640,000			Assets
Cost of goods sold				(3,600,000)		(360,000)			Cash					$560,000		$240,000
Gross profit				1,600,000		280,000			Accounts receivable					640,000		400,000
Operating and other expenses				(1,200,000)		(160,000)			Inventories					800,000		640,000
Bond interest income				40,000		-			PPE, net					2,400,000		1,000,000
Bond interest expense				-		(33,600)			Equity investment					480,000		-
Total expenses				(1,160,000)		(193,600)			Investment in bond, net					592,000		-
Income from subsidiary				24,000		-								$5,472,000		$2,280,000
Net income				$464,000		$86,400			Liabilities and stockholders' equity
Statement of retained earnings									Accounts payable					$640,000		$200,000
BOY retained earnings				$608,000		$220,800			Other current liabilities					720,000		320,000
Net income				464,000		86,400			Bond payable (net)					-		604,800
Dividends				(160,000)		(32,000)			Other long-term liabilities					1,120,000		360,000
Ending retained earnings				$912,000		$275,200			Common stock					480,000		120,000
									APIC					1,600,000		400,000
									Retained earnings					912,000		275,200
														5,472,000		2,280,000

Provide the consolidation entries and prepare a consolidation worksheet for the year ended December 31, 2022.

Round answers to the nearest whole number.

Consolidation Journal
	Description	Debit	Credit
[ADJ]	Investment in Subsidiary
	BOY Retained earnings-Parent
[C]	Income from subsidiary
	Income attributable to NCI
	Dividends-Subsidiary
	Noncontrolling Interest
[E]	Common Stock (Subsidiary)
	APIC (Subsidiary)
	BOY Retained earnings-Subsidiary
	Investment in Subsidiary
	Noncontrolling interest
[Ibond]	Bond payable, net
	Interest income
	Investment in bonds, net
	Interest expense
	Investment in Subsidiary

Use negative signs with your answers in the Consolidated column for: Cost of goods sold, all expenses (inc. Total expenses), Income attributable to NCI and Dividends.