Determining ending consolidated balances in the second year following the acquisition-Equity method Assume that your company acquired a subsidiary on January 1, 2012. The purchase price was $700,000 in excess of the subsidiary's book value of Stockholders' Equity on the acquisition date, and that excess was assigned to the following [A] assets: Original Original Useful Life [A] Asset Amount (years) Property, plant and equipment (PPE), net $350,000 Goodwill 350,000 Indefinite $700,000 20 The AAP asset relating to undervalued PPE with a 20-year useful life has been depreciated as part of the parent's equity method accounting. The financial statements of the parent and its subsidiary for the year ended December 31, 2013, are as follows: Parent Subsidiary Income statement: Sales Cost of goods sold Gross profit Equity income Operating expenses Net income Parent Subsidiary Balance sheet: $5,500,000 $1,205,000 Assets (3,960,000) (720,000) Cash 1,540,000 485,000 Accounts receivable 155,500 Inventory (825,000) (312,000) Equity investment $870,500 $173,000 Property, plant and equipment (PPE), net $928,050 $314,200 1,403,000 278,400 2,134,000 357,600 1,612,800 11,365,200 661,600 $17,443,050 $1,611,800 $3,711,800 Statement of retained earnings: BOY retained earnings Net income Dividends Ending retained earnings 870,500 (176,100) $4,406,200 $620,000 Liabilities and stockholders' equity 173,000 Accounts payable (25,200) Accrued liabilities $767,800 Long-term liabilities Common stock APIC Retained earnings $805,200 $114,400 957,000 149,600 7,000,000 400,000 507,450 80,000 3,767,200 100,000 4,406,200 767,800 $17,443,050 $1,611,800 At what amount will the following accounts appear on the consolidated financial statements? Note: Do not use negative signs with your answers. a. Sales $ 0 b. Equity income 0 c. Operating expenses $ 0 d. Accounts receivable $ 0 e. Equity investment $ 0 f. Property plant and equipment (PPE) net $ g. Goodwill h. Common stock $ i. Retained earnings $ 0 0 LA 0 $ Determining ending consolidated balances in the second year following the acquisition-Equity method Assume that your company acquired a subsidiary on January 1, 2012. The purchase price was $700,000 in excess of the subsidiary's book value of Stockholders' Equity on the acquisition date, and that excess was assigned to the following [A] assets: Original Original Useful Life [A] Asset Amount (years) Property, plant and equipment (PPE), net $350,000 Goodwill 350,000 Indefinite $700,000 20 The AAP asset relating to undervalued PPE with a 20-year useful life has been depreciated as part of the parent's equity method accounting. The financial statements of the parent and its subsidiary for the year ended December 31, 2013, are as follows: Parent Subsidiary Income statement: Sales Cost of goods sold Gross profit Equity income Operating expenses Net income Parent Subsidiary Balance sheet: $5,500,000 $1,205,000 Assets (3,960,000) (720,000) Cash 1,540,000 485,000 Accounts receivable 155,500 Inventory (825,000) (312,000) Equity investment $870,500 $173,000 Property, plant and equipment (PPE), net $928,050 $314,200 1,403,000 278,400 2,134,000 357,600 1,612,800 11,365,200 661,600 $17,443,050 $1,611,800 $3,711,800 Statement of retained earnings: BOY retained earnings Net income Dividends Ending retained earnings 870,500 (176,100) $4,406,200 $620,000 Liabilities and stockholders' equity 173,000 Accounts payable (25,200) Accrued liabilities $767,800 Long-term liabilities Common stock APIC Retained earnings $805,200 $114,400 957,000 149,600 7,000,000 400,000 507,450 80,000 3,767,200 100,000 4,406,200 767,800 $17,443,050 $1,611,800 At what amount will the following accounts appear on the consolidated financial statements? Note: Do not use negative signs with your answers. a. Sales $ 0 b. Equity income 0 c. Operating expenses $ 0 d. Accounts receivable $ 0 e. Equity investment $ 0 f. Property plant and equipment (PPE) net $ g. Goodwill h. Common stock $ i. Retained earnings $ 0 0 LA 0 $
