MAKE SCHEDULES
50. Prepare consolidation spreadsheet for intercompany sale of equipmentEquity method Assume a parent company acquired its subsidiary on January 1, 2015, at a purchase price that was $222,000 in excess of the book value of the subsidiary's Stockholders' Equity on the acquisition date. Of that excess, $132,000 was assigned to a Customer List that is being amortized over a 10-year period. The remaining $90,000 was assigned to Goodwill. In January of 2018, the wholly owned subsidiary sold Equipment to the parent for a cash price of $72,000. The subsidiary had acquired the equipment at a cost of $84,000 and depreciated the equip- ment over its 10-year useful life using the straight-line method (no salvage value). The subsidiary had depreciated the equipment for 4 years at the time of sale. The parent retained the depreciation policy of the subsidiary and depreciated the equipment over its remaining 6-year useful life. Following are financial statements of the parent and its subsidiary for the year ended December 31, 2019. The parent uses the equity method to account for its Equity Investment. The Customer List was amortized as part of the parent's equity method accounting. Parent Subsidiary Parent Subsidiary Income statement: Sales. ... Cost of goods sold Gross profit. .. Income (loss) from subsidiary.. Operating expenses. $720,000 (420,000) 300,000 $4,800,000 (3,480,000) 1,320,000 74,400 (1,094,400) $ 300,000 Balance sheet: Assets Cash... Accounts receivable Inventory. PPE, net. Equity investment. $ 330,000 420,000 780,000 3,030,000 540,000 $5,100,000 $ 192,000 258,000 330,000 618,000 0 0 (216,000) $ 84,000 Net income. $1,398,000 $ Statement of retained earnings: Beginning retained earnings.. Net income Dividends Ending retained earnings $2,268,000 300,000 (168,000) $2,400,000 $168,000 84,000 (12,000) $240,000 Liabilities and stockholders' equity Accounts payable... Other current liabilities Long-term liabilities. Common stock. APIC. Retained earnings $ 390,000 480,000 900,000 330,000 600,000 2,400,000 $5,100,000 99,600 120,000 780,000 68,400 90,000 240,000 $1,398,000 a. Prepare the journal entry that the subsidiary made to record the sale of the equipment to the parent, the journal entry that the parent made to record the purchase, and the [I] entries for the year of sale. b. Compute the remaining portion of the deferred gain on January 1, 2019. Show the computation to yield the $74,400 of Income (loss) from subsidiary reported by the parent for the year ended December 31, 2019. d. Compute the Equity Investment balance of $540,000 on December 31, 2019. Prepare the consolidation entries for the year ended December 31, 2019. f. Prepare the consolidation spreadsheet for the year ended December 31, 2019. C. e
