Intercompany Transactions Assume a parent company acquired 100 of a subsidiary on 1 1 X1 at a purchase price that was $300,000 in excess of the subsidiary's book value Of that excess, $200,000 was assigned to an unrecorded patent that is being amortized over 10 years The remaining $100,000 was assigned to goodwill In the year X2, the subsidiary sold land to the parent for $100,000 The land was reported on the balance sheet of the subsidiary for $70,000 at the date of sale The financial statements for the parent and subsidiary for the year ended 12 31 X3 are attached in the Excel spreadsheet Prepare the consolidated financial statements at 12 31 X3 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 , A , D or I entry Show calculations on entries Consolidation Entries Pare Subsidiary Dr Cr Consolidated Sales 3,000,000 Cost of goods sold 375,000 (2, 100,000) Gross profit (225,000 900,000 150,000 0 Income (loss) from subsidiary 32,500 0 Operating expenses (570,000) 0 Net income (97,500) 362,500 52,500 o Statement of Retained Earnings BOY retained earnings 1,477,200 Net income 193,750 362,500 Dividends 52,500 ooo (83,375) EOY retained earnings (6,825) 1,756,325 239,425 o Balance Sheet Asse Cash 341,566 121,211 Accounts receivable 384,000 87,000 Inventory 582,000 111,750 PPE, net 2,799,600 206,750 Patent Goodwill Equity investment 505,675 0 4,612,841 526,711 Liabilities stockholders' equity Accounts payable 224,700 44,760 Other current liabilities 276,816 Long term liabilities 61,276 1,500,000 125,000 Common stock 490,500 25,000 APIC 364,500 31,250 Retained earnings 1,756,325 239,425 4,612,841 526,711 0

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Intercompany Transactions Assume a parent company acquired 100% of a subsidiary on 1/1/X1 at a purchase price that was $300,000 in excess of the subsidiary's

Intercompany Transactions

Assume a parent company acquired 100% of a subsidiary on 1/1/X1 at a purchase price that was $300,000 in excess of the subsidiary's book value. Of that excess, $200,000 was assigned to an unrecorded patent that is being amortized over 10 years. The remaining $100,000 was assigned to goodwill. In the year X2, the subsidiary sold land to the parent for $100,000.The land was reported on the balance sheet of the subsidiary for $70,000 at the date of sale. The financial statements for the parent and subsidiary for the year ended 12/31/X3 are attached in the Excel spreadsheet.

Prepare the consolidated financial statements at 12/31/X3 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], [A], [D] or [I]entry.
Show calculations on entries.

Consolidation Entries Pare Subsidiary Dr Cr Consolidated Sales 3,000,000 Cost of goods sold 375,000 (2, 100,000) Gross profit (225,000 900,000 150,000 0 Income (loss) from subsidiary 32,500 0 Operating expenses (570,000) 0 Net income (97,500) 362,500 52,500 o Statement of Retained Earnings: BOY retained earnings 1,477,200 Net income 193,750 362,500 Dividends 52,500 ooo (83,375) EOY retained earnings (6,825) 1,756,325 239,425 o Balance Sheet: Asse Cash 341,566 121,211 Accounts receivable 384,000 87,000 Inventory 582,000 111,750 PPE, net 2,799,600 206,750 Patent Goodwill Equity investment 505,675 0 4,612,841 526,711 Liabilities & stockholders' equity Accounts payable 224,700 44,760 Other current liabilities 276,816 Long-term liabilities 61,276 1,500,000 125,000 Common stock 490,500 25,000 APIC 364,500 31,250 Retained earnings 1,756,325 239,425 4,612,841 526,711 0