Individual Consolidation Project Due 10/4/21 on Blackboard(10 points)

On 1/1/Y1, company B Co., under the equity method, paid $8/sharecash for 60% of company A Inc.s outstanding 100,000 shares of voting stock. The remaining 40% of Company A outstanding voting stock had been traded at a fair market value of $6.50/share on the open market immediately before and after 1/1/Y1. company As available balance sheet accounts are as follows (credit balances are in brackets).

Current assets		$14,000		Liabilities		$(212,000)
Property and equipment, net		268,000		Common stock		(100,000)
Patents		190,000		Retained earnings		(160,000)
		$472,000				$(472,000)

company A books showed $260,000 for net stockholders equity on 1/1/Y1. The book value of all company A assets and liabilities on the acquisition date reflected their respective fair market value except for two assets: (1) an equipment that was understated on books when compared with its fair market value by $55,000with a remaining life of 5 years and (2) possessed patents unrecorded on its books worth $285,000 with an estimated useful life of 10 years.

After owing company A for two years, the respective companies financial statements for the year ended 12/31/Y2 are as follows.

		company BCo.		company A, Inc.
Sales		$(640,500)		$(428,500)
Cost of goods sold		325,000		200,000
Depreciation expense		80,000		34,000
Amortization expense		14,000		21,000
Other operating expenses		52,000		63,500
Equity in company A earnings		(42,300)		0
Separate company net income		$(211,800)		$(110,000)
Retained earnings, 1/1/Y2		$(820,200)		$(296,500)
Net income (above)		$(211,800)		$(110,000)
Dividends declared		50,000		30,000
Retained earnings, 12/31/Y2		$(982,000)		$(376,500)
Current assets		$125,000		$81,500
Investment in company A, Inc.		562,500		0
Property and equipment, net		837,000		259,000
Patents		149,000		147,500
Total Assets		$1,673,500		$488,000
Liabilities		$(371,500)		$(11,500)
Common stock-company B		(320,000)		0
Common stock-company A		0		(100,000)
Retained earnings, 12/31/Y2 (above)		(982,000)		(376,500)
Total liabilities and equities		$(1,673,500)		$(488,000)

There were no intra-entity receivables or payables. company B and Company A did not transfer any inventory between them for the whole Y2.