Consolidation worksheet for gain on constructive retirement of subsidiarys debt with no AAPCost method Assume that a Parent company acquires a 75% interest in its Subsidiary on January 1, 2015. On the date of acquisition, the fair value of the 75 percent controlling interest was $600,000 and the fair value of the 25 percent noncontrolling interest was $200,000. On January 1, 2015, the book value of net assets equaled $800,000 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, 2015, the retained earnings of the subsidiary was $150,000.

On December 31, 2016, the Subsidiary company issued $750,000 (face) 6 percent, five-year bonds to an unaffiliated company for $765,000. 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 $3,000 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, 2016 $765,000 Dec. 31, 2017 $45,000 $3,000 $42,000 762,000 Dec. 31, 2018 45,000 3,000 42,000 759,000 Dec. 31, 2019 45,000 3,000 42,000 756,000 Dec. 31, 2020 45,000 3,000 42,000 753,000 Dec. 31, 2021 45,000 3,000 42,000 750,000

On December 31, 2018, the Parent paid $735,000 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 $5,000 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, 2018 $735,000 Dec. 31, 2019 $45,000 $5,000 $50,000 740,000 Dec. 31, 2020 45,000 5,000 50,000 745,000 Dec. 31, 2021 45,000 5,000 50,000 750,000

On December 31, 2018, the Parent paid $735,000 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 $5,000 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, 2018 $735,000 Dec. 31, 2019 $45,000 $5,000 $50,000 740,000 Dec. 31, 2020 45,000 5,000 50,000 745,000 Dec. 31, 2021 45,000 5,000 50,000 750,000

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, 2019:

Provide the consolidation entries and prepare a consolidation worksheet for the year ended December 31, 2019. NEED HELP GETTING ADJ ENTRY, PLEASE SHOW YOUR WORK!

Parent Subsidiary Parent Income statement Sales $6,500,000 Cost of goods sold (4.500.000) Gross profit 2,000,000 Operating and other expenses (1.500,000) Bond interest income 50.000 Bond Interest expense Total expenses (1,450,000) Income from subsidiary 30,000 Net income $580,000 Statement of retained earnings BOY retained earnings $760,000 Net income 580,000 Dividends (200,000) Ending retained earnings $1,140,000 Subsidiary Balance sheet $800,000 Assets (450,000) Cash 350,000 Accounts receivable (200,000) Inventories -PPE.net (42.000) Equity investment (242.000) Investment in bond, net $700.000 $300,000 800,000 500,000 1.000.000 800,000 3,000,000 1.250.000 600.000 740,000 56.840.000 $2,850.000 $800.000 900.000 $250.000 400,000 756,000 $108.000 Liabilities and stockholders' equity Accounts payable $276,000 Other current liabilities 108,000 Bond payable (net) (40,000) Other long-term liabilities $344.000 Common stock APIC Retained earnings 1,400.000 600.000 2.000.000 1,140,000 6,840,000 450.000 150,000 500,000 344,000 2.850,000 SS Provide the consolidation entries and prepare a consolidation worksheet for the year ended December 31, 2019 Round answers to the nearest whole number. Consolidation Journal Description Debit Credit [AD] Investment in Subsidiary 78.750 x BOY Retained earnings-Parent 0X [C] Income from subsidiary 30.000 Income attributable to NCI 27,000 Dividends-Subsidiary 40,000 Noncontrolling Interest 17,000 [E] Common Stock (Subsidiary) 150.000 APIC (Subsidiary) 500.000 BOY Retained earnings-Subsidiary 276,000 Investment in Subsidiary 694.500 Noncontrolling interest 231,500 [lbond] Bond payable, net 756,000 Interest income 50,000 Investment in bonds, net 740,000 Interest expense 42.000 Investment in Subsidiary 24.000