On January 1, 2020, Parent Company purchased 80% of the common stock of Subsidiary Company for $320,000.

· On this date, Subsidiary had common stock, other paid-in capital, and retained earnings of $40,000, $120,000, and $190,000, respectively.

· Net income and dividends for Subsidiary Company were $50,000 and $10,000, respectively.

· Parent Company has used the simple equity method for recording the Subsidiary income and dividends.

· On January 1, 2020, the only tangible assets of Subsidiary that were undervalued were inventory and equipment. Inventory was worth $5,000 more than cost. Equipment, which was worth $15,000 more than book value, has a remaining life of 5 years, and straight-line depreciation is used. Any remaining excess is goodwill.

The following trial balances of the two companies are prepared on December 31, 2020.

a). Prepare the Value Analysis table and the Determination and Distribution of Excess schedule table.

b). Prepare all the eliminations and adjustments that would be made on the 2020 consolidated worksheet.

c). Prepare the Income Distribution Schedules for Subsidiary and Parent.

d). Prepare the consolidated worksheet.

e). Prepare the 2020 consolidated income statement and balance sheet.

 

Parent Subsidiary Investment in Sub 352,000 Current Assets 132,000 180,000 Inventory 60,000 40,000 Equipment 350,000 300,000 Accumulated Depreciation (120,000) (50,000) Goodwill Bond Payable (134,000) (80,000) CS-Par (100,000) PIC-ar (200,000) RE-Par (200,000) CS-Sub (40,000) PIC-Sub (120,000) RE-Sub (190,000) Sales (550,000) (400,000) xpense 450,000 350,000 Depreciation Expense Sub Income (40,000) Dividend Declared - Sub 10,000 Totals