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home / study / business / accounting / accounting questions and answers / option #2: consolidation at the end of the first year subsequent to date of acquisition (purchase ... Question: Option #2: Consolidation at the end of the first year subsequent to date of acquisition (purchase... Option #2: Consolidation at the end of the first year subsequent to date of acquisition (purchase price greater than book value) Assume that a parent company acquires its subsidiary on 1/1/xx, by exchanging 41,500 shares of its $1 par value common stock, with a market value on acquisition date of $36 per share, for all of the outstanding voting shares of the subsidiary. You have been charged with preparing the consolidation of these two entities at 12/31/xx. On acquisition date (1/1/xx), all of the subsidiarys assets and liabilities had fair values equaling their book values except PPE assets are undervalued by $81,000 (depreciation =$5,400 per year), the subsidiary has an unrecorded patent with a fair value of $261,000 (amortization = $32,625 per year) and the parent records $162,000 of goodwill in the transaction. Submission Requirements: Using the ACT470_Mod02-Option02.xlsx Excel spreadsheet in the Module 2 folder: Prepare the consolidated balance sheet at 12/31/xx by placing the appropriate entries in their respective debit/credit column cells. Indicate, in the blank column cell to the left of the debit and credit column cells if the entry is a [C], [E] or [A] or [D] entry. Use Excel formulas to derive the Consolidated column amounts and totals. Using the Home key in Excel, go to the Styles area and highlight the [C], [E], [A] and [D]cell entries in different shades. Review the grading rubric following this assignment, to understand how you will be graded on this assignment. Reach out to your instructor if you have questions about the assignment.

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Consolidation Entries Parent Subsidiary Consolidated Income Statement Sales Cost of goods sold Gruss profit Equity income Operating expenses Net income 1,485,000 (891,000) 594,000 4,950,000 (3,465,000) 1,485,000 169,875 (940,500) 714,375 (386, 100) 207,900 Statement of retained earnings: BOY retained earnings Net income Dividends Ending retained earnings 2,570,400 714,375 (144,180) 3,140,595 767,250 207,900 (31,185) 943,965 Balance sheet: Assets Cash Accounts receivable Inwentory Equity investment 275,355 633,600 %60,300 1,632,690 382,635 344,520 442,530 3,629,340 818,730 Property, plant and equipment (PPE), net Patent Goodwill 7,131,285 1,988,415 362,340 430,650 Liabilities and stockholders' equity Accounts payable Accued liabilities Long-term liabilities Common stock APIC Retained earnings 566,100 2,631,600 3,140,595 7,131,285 141,570 185,130 495,000 99,000 123,750 943,965 1,998,415

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