d. Prepare the consolidation spreadsheet for the year ended December 31, 2013. Hint: Use negative signs with answers when appropriate.

Consolidation spreadsheet for continuous sale of inventory - Equity method Assume that a parent company acquired a subsidiary on January 1, 2010. The purchase price was $500,000 million in excess of the subsidiary's book value of Stockholders' Equity on the acquisition date, and that excess was assigned to the following AAP assets: Original Original Useful AAP Asset Amount Life (years) Property, plant and equipment (PPE), net $100,000 20 Customer list 165,000 10 Royalty agreement 135,000 Goodwill 100,000 indefinite $500,000 The AAP assets with a definite useful life have been amortized as part of the parent's equity method accounting. The Goodwill asset has been tested annually for impairment, and has not been found to be impaired. Assume that the parent company sells inventory to its wholly owned subsidiary. The subsidiary, ultimately, sells the inventory to customers outside of the consolidated group. You have compiled the following data for the years ending 2012 and 2013: Inventory Sales $68,000 $43,700 Gross Profit Remaining in Unsold Inventory $19,580 $12,797 Receivable (Payable) $27,400 $13,437 2013 2012 The inventory not remaining at the end of the year has been sold to unaffiliated entities outside of the consolidated group. The parent uses the equity method to account for its Equity Investment The financial statements of the parent and its subsidiary for the year ended December 31, 2013, follow in part d. below. c. Prepare the consolidation journal entries for the year ended December 31, 2013 Consolidation Worksheet Description Debit Credit [C] Dividends Common stock APIC [A] PPE net Customer list Royalty agreement [D] PPE net Customer list [lcogs] [lsales] [lcogs] [lpay] a. Show the computation to yield the pre-consolidation $69,837 Income (loss) from subsidiary reported by the parent during 2013. Hint: Use negative signs with answers when appropriate. Plus: Less: AAP depreciation Income (loss) from subsidiary b. Show the computation to yield the Equity Investment balance of $959,789 reported by the parent at December 31, 2013. Hint: Use negative signs with answers when appropriate. Common stock APIC Retained earnings BOY unamortized AAP BOY deferred profit Income (loss) from subsidiary Dividends Equity investment Income statement: Sales Cost of goods sold $4,370,000 (3,059,000) $785,000 [lsales] (469,800) [lcogs] [lcogs] [lsales] 315,200 1,311,000 69,837 (830,300) $550,537 [C] [D] (203,580) $111,620 [E] $ $2,195,488 550,537 (128,164) $2,617,861 $404,550 111,620 (14,251) $501,919 Gross profit Income (loss) from subsidiary Operating expenses Net income Statement of retained earnings: BOY retained earnings Net income Dividends EOY retained earnings Balance sheet: Assets Cash Accounts receivable Inventory PPE, net Customer List Royalty agreement Goodwill Equity investment $650,639 559,360 847,780 4,078,084 $255,087 181,656 233,334 431,694 [lpay] [lcogs) [D] [A] [A] [A] [D] [A] 959,789 [lcogs] $7,095,652 $1,101,771 [lpay] Liabilities and stockholders' equity Accounts payable Other currentliabilities Long-term liabilities Common stock APIC Retained earnings $327,313 $93,459 403,228 127,943 2,500,000 261,000 714,495 52,200 532,755 65,250 2,617,861 501,919 $7,095,652 $1,101,771 [E] [E] Consolidation spreadsheet for continuous sale of inventory - Equity method Assume that a parent company acquired a subsidiary on January 1, 2010. The purchase price was $500,000 million in excess of the subsidiary's book value of Stockholders' Equity on the acquisition date, and that excess was assigned to the following AAP assets: Original Original Useful AAP Asset Amount Life (years) Property, plant and equipment (PPE), net $100,000 20 Customer list 165,000 10 Royalty agreement 135,000 Goodwill 100,000 indefinite $500,000 The AAP assets with a definite useful life have been amortized as part of the parent's equity method accounting. The Goodwill asset has been tested annually for impairment, and has not been found to be impaired. Assume that the parent company sells inventory to its wholly owned subsidiary. The subsidiary, ultimately, sells the inventory to customers outside of the consolidated group. You have compiled the following data for the years ending 2012 and 2013: Inventory Sales $68,000 $43,700 Gross Profit Remaining in Unsold Inventory $19,580 $12,797 Receivable (Payable) $27,400 $13,437 2013 2012 The inventory not remaining at the end of the year has been sold to unaffiliated entities outside of the consolidated group. The parent uses the equity method to account for its Equity Investment The financial statements of the parent and its subsidiary for the year ended December 31, 2013, follow in part d. below. c. Prepare the consolidation journal entries for the year ended December 31, 2013 Consolidation Worksheet Description Debit Credit [C] Dividends Common stock APIC [A] PPE net Customer list Royalty agreement [D] PPE net Customer list [lcogs] [lsales] [lcogs] [lpay] a. Show the computation to yield the pre-consolidation $69,837 Income (loss) from subsidiary reported by the parent during 2013. Hint: Use negative signs with answers when appropriate. Plus: Less: AAP depreciation Income (loss) from subsidiary b. Show the computation to yield the Equity Investment balance of $959,789 reported by the parent at December 31, 2013. Hint: Use negative signs with answers when appropriate. Common stock APIC Retained earnings BOY unamortized AAP BOY deferred profit Income (loss) from subsidiary Dividends Equity investment Income statement: Sales Cost of goods sold $4,370,000 (3,059,000) $785,000 [lsales] (469,800) [lcogs] [lcogs] [lsales] 315,200 1,311,000 69,837 (830,300) $550,537 [C] [D] (203,580) $111,620 [E] $ $2,195,488 550,537 (128,164) $2,617,861 $404,550 111,620 (14,251) $501,919 Gross profit Income (loss) from subsidiary Operating expenses Net income Statement of retained earnings: BOY retained earnings Net income Dividends EOY retained earnings Balance sheet: Assets Cash Accounts receivable Inventory PPE, net Customer List Royalty agreement Goodwill Equity investment $650,639 559,360 847,780 4,078,084 $255,087 181,656 233,334 431,694 [lpay] [lcogs) [D] [A] [A] [A] [D] [A] 959,789 [lcogs] $7,095,652 $1,101,771 [lpay] Liabilities and stockholders' equity Accounts payable Other currentliabilities Long-term liabilities Common stock APIC Retained earnings $327,313 $93,459 403,228 127,943 2,500,000 261,000 714,495 52,200 532,755 65,250 2,617,861 501,919 $7,095,652 $1,101,771 [E] [E]