Question
Determining ending consolidated balances in the third year following the acquisitionCost method Assume a parent company acquired a subsidiary on January 1, 2017, for $1,100,000.
Determining ending consolidated balances in the third year following the acquisitionCost method
Assume a parent company acquired a subsidiary on January 1, 2017, for $1,100,000. The purchase price was $750,000 in excess of the subsidiarys $350,000 book value of Stockholders Equity on the acquisition date. Of this excess purchase price, $500,000 was assigned to Property, plant and equipment with a remaining economic useful life of 10 years, and $250,000 was assigned to Goodwill. On the acquisition date, the subsidiary reported retained earnings equal to $80,000. The parent uses Investment cost method of pre-consolidation Equity investment bookkeeping. The financial statements of the parent and its subsidiary for the year ended December 31, 2019, are as follows:
Parent | Subsidiary | Parent | Subsidiary | |||
---|---|---|---|---|---|---|
Income statement: | Balance sheet: | |||||
Sales | $2,400,000 | $950,000 | Assets | |||
Cost of goods sold | (1,300,000) | (560,000) | Cash | $1,100,000 | $150,000 | |
Gross profit | 1,100,000 | 390,000 | Accounts receivable | 1,500,000 | 240,000 | |
Investment income | 50,000 | Inventory | 2,400,000 | 530,000 | ||
Operating expenses | (600,000) | (260,000) | Equity investment | 1,000,000 | ||
Net income | $550,000 | $130,000 | Property, plant and equipment (PPE), net | 4,000,000 | 1,000,000 | |
$10,000,000 | $1,920,000 | |||||
Statement of retained earnings: | ||||||
BOY retained earnings | $1,500,000 | $ 500,000 | Liabilities and stockholders equity | |||
Net income | 550,000 | 130,000 | Accounts payable | $1,000,000 | $170,000 | |
Dividends | (250,000) | (50,000) | Accrued liabilities | 800,000 | 200,000 | |
Ending retained earnings | $1,800,000 | $ 580,000 | Long-term liabilities | 3,000,000 | 700,000 | |
Common stock | 500,000 | 120,000 | ||||
APIC | 2,900,000 | 150,000 | ||||
Retained earnings | 1,800,000 | 580,000 | ||||
$10,000,000 | $1,920,000 |
At what amount will the following accounts appear in the consolidated financial statements for the year ended December 31, 2019?
Please help figure out the AMOUNT below. Thank you.
Account | Amount |
---|---|
a. Sales | $ |
b. Investment Income | $ |
c. Operating expenses | $ |
d. Inventories | $ |
e. Equity investment | $ |
f. PPE, net | $ |
g. Goodwill | $ |
h. Common Stock | $ |
i. Retained Earnings | $ |
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