On January 1, 2016, Parent Company purchased 100% of the common stock of Subsidiary Company for $390,000. On this date, Subsidiary had common stock, other paid-in capital, and retained earnings of $50,000, $100,000, and $200,000, respectively. Any excess of cost over book value is due to goodwill. Parent accounts for the Investment in Subsidiary using the simple equity method.

On January 1, 2017, Parent purchased equipment for $204,120 and immediately leased the equipment to Subsidiary on a 4-year lease. The minimum lease payments of $60,000 are to be made annually on January 1, beginning immediately, for a total of 4 payments. The implicit interest rate is 12% and is known to both parties. The lease provides for an automatic transfer of title at the end of 4 years. The estimated useful like of the equipment is 6 years. The lease has been capitalized by both companies.

On January 1, 2016, Parent held merchandise acquired from Subsidiary for $10,000. During 2016, subsidiary sold merchandise to Parent for $50,000, of which $15,000 is held by Parent of December 31, 2016. Subsidiary's usual gross profit on affiliated sales is 40%.

Required:

Using the balance sheet and income statement provided below, complete an amortization table of the lease using the effective interest method to determine the carrying amount of the capitalized lease asset, lease obligation, and complete a consolidated worksheet creating an income statement and balance sheet.

I have attached the consolidated worksheet below for you to use.

Parent Subsidiary 234,196.00 $ 280,504.00 Current Assets $ Min. Lease Payments Rec. Unearned Interest Income Investment in Sub. Company $ $ $ Land Buildings and Equipment Accumulated Depreciation Equipment under Cap. Lease Acc. Depr. - Eq. Cap. Lease Goodwill $ $ $ 100,000.00 $ 350,000.00 $ (120,000.00) $ $ $ 60,000.00 300,000.00 (80,000.00) 204,120.00 (68,040.00) Current Liabilities Obligation under Cap. Lease Interest Payable on Lease Other Long-Term Liabilities Common Stock - P Co. Other Paid-in Capital- P Co. Retained Earnings - P Co. $ (135,000.00) $ $ $ (200,000.00) $ (200,000.00) (100,000.00) (482,780.00) (48,000.00) (101,414.00) (12,170.00) (15,000.00) $ $ $ (50,000.00) (100,000.00) (310,000.00) $ $ $ $ Common Stock - S Co. Other Paid-in Capital - S Co. Retained Earnings- S Co. 120,000.00 (6,416.00) 560,000.00 Net Sales Cost of Good Sold $ $ (600,000.00) $ 372,170.00 $ (350,000.00) 200,000.00 Operating & Other Expenses Interest Income on Lease Interest Expense on Lease Subsidiary Income Dividends Declared - P Co. $ $ 140,000.00 $ (12,170.00) $ (70,000.00) 50,000.00 67,830.00 $ $ Debit 12,170.00 Dividends Declared - S Co. $ 10,000.00 Totals Consolidated Net Income ........................................................................................................................... To NCI ........................................................................................................................... To Controlling Interest ........................................................................................................................... Total NCI .......................................................................................................................................... Retained Earnings Controlling Interest .............................................................................................................................. Credit Con Income NCI .......................................... .......................................... .......................................... ........................................................................... ...................................................................................................... Controlling R.E. Consolidated B/S