I have the journal entries for e and the worksheet for f attached
110110 LOS 54. Prepare consolidation spreadsheet for intercompany sale of equipment Cost method Assume a parent company acquired a subsidiary on January 1, 2015 for $576,000. The purchase price was $207,000 in excess of the book value of the subsidiary's Stockholders' Equity on the acquisition date. On the acquisition date, the subsidiary's stockholders equity was comprised of S270.000 of no- par common stock and 599,000 of retained earnings. The Acquisition Accounting Premium (AAP) was assigned as follows: an increase of $9,000 in accounts receivable that were entirely collected during the year after acquisition, an increase of $45,000 for property, plant and equipment that has 10 years of remaining useful life, 572,000 for an unrecorded patent with an 8-year remaining life and $81,000 for goodwill. All amortizable components of the AAP are amortized using the straight-line method. On January 1, 2017, the parent sold Equipment to the subsidiary for a cash price of $89.100. The parent had acquired the equipment at a cost of $84,600 and depreciated the equipment over its 12-year useful life using the straight-line method (no salvage value). The parent had depreciated the equipment for 2 years at the time of sale. The subsidiary retained the depreciation policy of the parent and depreci- ates the equipment over its remaining 10-year useful life. Following are financial statements of the parent and its subsidiary as of December 31, 2019. The parent uses the cost method of pre-consolidation investment bookkeeping. Parent Subsidiary Parent Subsidiary Income statement: Balance sheet: Sales. $900.000 $414,000 Assets Cost of goods sold (495,000) (252.000) Cash $ 81.000 $ 54,000 405.000 Gross profit 162.000 Accounts receivable 108.000 81.000 Inventory 252.000 126.000 Deprec. & amort, expense (27.000) (18.000) Equity investment 578,000 Operating expenses. (270,000) (72.000) PPE.net 306.000 216.000 Interest expense (13,500) (4,500) Other assets 117.000 198,000 Total expenses (310,500) (94,500) Total assets $1,440,000 $675,000 Income (loss) from subsidiary 31.500 Liabilities and stockholders' equity Net income $126.000 $ 67,500 Accounts payable $ 225,000 $ 48,600 Accrued liabilities 22.500 41.400 Notes payable 135,000 54.000 Retained earnings statement: 540,000 Common stock 270.000 Beginning retained earnings $495.000 $225.000 Retained eaming 261.000 126.000 517,500 Net income.. 67.500 Dividends (103,500) (31,500) Total liabilities and equity $1.440,000 $675,000 Ending retained earnings $517.500 $261,000 4. Prepare the joumal entry that the parent made to record the sale of the equipment to the subsidiary, the journal entry that the subsidiary made to record the purchase, and the entries for the year of sale b. Compute the remaining portion of the deferred gain at January 1, 2019. Prior to preparing consolidated financial statements, compute the amount of net income the parent would have reported for the year ended December 31, 2019 assuming the parent applied the equity method instead of the cost method of pre-consolidation bookkeeping, d. Prior to preparing consolidated financial statements, compute the amount of Equity investment the parent would have reported on December 31, 2019 assuming the parent applied the equity method instead of the cost method of pre-consolidation bookkeeping. Prepare the consolidation entries for the year ended December 31, 2019. f. Prepare the consolidation spreadsheet for the year ended December 31, 2019. Consolidation Entries Dr Parent Cr Subsidiary Consolidated Income Statement Sales Cost of goods sold Gross profit Deprec. & amort. expense Operating expenses Interest expense Total Expenses Income (loss) from subsidiary Net income 900,000 (495,000) 405,000 (27,000) (270,000) (13,500) (310,500) 31,500 126,000 414,000 (252,000) 162,000 (18,000) (72,000) (4,500) (94,500) 1,314,000 (747,000) 567,000 (45,000) (342,000) (18,000) (405,000) 31,500 193,500 67,500 495,000 126,000 (103,500) 517,500 225,000 67,500 (31,500) 261,000 720,000 193,500 (135,000) 778,500 81,000 108,000 252,000 576,000 54,000 81,000 126,000 135,000 189,000 378,000 576,000 5 Retained earnings statement: BOY retained earnings 7 Net income 8 Dividends 9 Ending retained earnings 20 21 Balance sheet: 22 Assets 23 Cash 24 Accounts receivable 25 Inventory 26 Equity investment 27 28 29 PPE, net 30 31 Other assets 32 Patent 33 Goodwill 34 Total assets 35 Labilities and stockholders' equity 36 Accounts payable 37 Accrued liabilities 38 Notes payable 39 Common stock 40 LOY Retained earnings 41 Total liabilities and equity 42 306,000 216,000 522,000 117,000 198,000 315,000 0 0 2,115,000 1,440,000 675,000 225,000 22,500 135,000 540,000 517,500 1,440,000 48,600 41,400 54,000 270,000 261.000 675,000 273,600 63,900 189,000 810,000 778,500 2,115,000 0 O Sheet1 7 100% $ % .0 .00 123 Default (Ari... 10 ... B D E F e equity investment boy retained earnings-parent income (loss) from sub dividends e BOY common stock sub equity investment a h PPE net patent goodwill equity investment dep exp PPE net patent [lgain) equity investment PPE net [Idep] PPE, net dep exp 110110 LOS 54. Prepare consolidation spreadsheet for intercompany sale of equipment Cost method Assume a parent company acquired a subsidiary on January 1, 2015 for $576,000. The purchase price was $207,000 in excess of the book value of the subsidiary's Stockholders' Equity on the acquisition date. On the acquisition date, the subsidiary's stockholders equity was comprised of S270.000 of no- par common stock and 599,000 of retained earnings. The Acquisition Accounting Premium (AAP) was assigned as follows: an increase of $9,000 in accounts receivable that were entirely collected during the year after acquisition, an increase of $45,000 for property, plant and equipment that has 10 years of remaining useful life, 572,000 for an unrecorded patent with an 8-year remaining life and $81,000 for goodwill. All amortizable components of the AAP are amortized using the straight-line method. On January 1, 2017, the parent sold Equipment to the subsidiary for a cash price of $89.100. The parent had acquired the equipment at a cost of $84,600 and depreciated the equipment over its 12-year useful life using the straight-line method (no salvage value). The parent had depreciated the equipment for 2 years at the time of sale. The subsidiary retained the depreciation policy of the parent and depreci- ates the equipment over its remaining 10-year useful life. Following are financial statements of the parent and its subsidiary as of December 31, 2019. The parent uses the cost method of pre-consolidation investment bookkeeping. Parent Subsidiary Parent Subsidiary Income statement: Balance sheet: Sales. $900.000 $414,000 Assets Cost of goods sold (495,000) (252.000) Cash $ 81.000 $ 54,000 405.000 Gross profit 162.000 Accounts receivable 108.000 81.000 Inventory 252.000 126.000 Deprec. & amort, expense (27.000) (18.000) Equity investment 578,000 Operating expenses. (270,000) (72.000) PPE.net 306.000 216.000 Interest expense (13,500) (4,500) Other assets 117.000 198,000 Total expenses (310,500) (94,500) Total assets $1,440,000 $675,000 Income (loss) from subsidiary 31.500 Liabilities and stockholders' equity Net income $126.000 $ 67,500 Accounts payable $ 225,000 $ 48,600 Accrued liabilities 22.500 41.400 Notes payable 135,000 54.000 Retained earnings statement: 540,000 Common stock 270.000 Beginning retained earnings $495.000 $225.000 Retained eaming 261.000 126.000 517,500 Net income.. 67.500 Dividends (103,500) (31,500) Total liabilities and equity $1.440,000 $675,000 Ending retained earnings $517.500 $261,000 4. Prepare the joumal entry that the parent made to record the sale of the equipment to the subsidiary, the journal entry that the subsidiary made to record the purchase, and the entries for the year of sale b. Compute the remaining portion of the deferred gain at January 1, 2019. Prior to preparing consolidated financial statements, compute the amount of net income the parent would have reported for the year ended December 31, 2019 assuming the parent applied the equity method instead of the cost method of pre-consolidation bookkeeping, d. Prior to preparing consolidated financial statements, compute the amount of Equity investment the parent would have reported on December 31, 2019 assuming the parent applied the equity method instead of the cost method of pre-consolidation bookkeeping. Prepare the consolidation entries for the year ended December 31, 2019. f. Prepare the consolidation spreadsheet for the year ended December 31, 2019. Consolidation Entries Dr Parent Cr Subsidiary Consolidated Income Statement Sales Cost of goods sold Gross profit Deprec. & amort. expense Operating expenses Interest expense Total Expenses Income (loss) from subsidiary Net income 900,000 (495,000) 405,000 (27,000) (270,000) (13,500) (310,500) 31,500 126,000 414,000 (252,000) 162,000 (18,000) (72,000) (4,500) (94,500) 1,314,000 (747,000) 567,000 (45,000) (342,000) (18,000) (405,000) 31,500 193,500 67,500 495,000 126,000 (103,500) 517,500 225,000 67,500 (31,500) 261,000 720,000 193,500 (135,000) 778,500 81,000 108,000 252,000 576,000 54,000 81,000 126,000 135,000 189,000 378,000 576,000 5 Retained earnings statement: BOY retained earnings 7 Net income 8 Dividends 9 Ending retained earnings 20 21 Balance sheet: 22 Assets 23 Cash 24 Accounts receivable 25 Inventory 26 Equity investment 27 28 29 PPE, net 30 31 Other assets 32 Patent 33 Goodwill 34 Total assets 35 Labilities and stockholders' equity 36 Accounts payable 37 Accrued liabilities 38 Notes payable 39 Common stock 40 LOY Retained earnings 41 Total liabilities and equity 42 306,000 216,000 522,000 117,000 198,000 315,000 0 0 2,115,000 1,440,000 675,000 225,000 22,500 135,000 540,000 517,500 1,440,000 48,600 41,400 54,000 270,000 261.000 675,000 273,600 63,900 189,000 810,000 778,500 2,115,000 0 O Sheet1 7 100% $ % .0 .00 123 Default (Ari... 10 ... B D E F e equity investment boy retained earnings-parent income (loss) from sub dividends e BOY common stock sub equity investment a h PPE net patent goodwill equity investment dep exp PPE net patent [lgain) equity investment PPE net [Idep] PPE, net dep exp
