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onsolidation several years subsequent to date of acquisition- Coust method e a parent company acquired a subsidiary on January 1, 2013. The purchase pri in

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onsolidation several years subsequent to date of acquisition- Coust method e a parent company acquired a subsidiary on January 1, 2013. The purchase pri in excess of the subsidiary's hook value of Stockholders" Equity on the acquisition date was assigned to the following TAl assets: nd that excess Original plant and equipment (PPE), net.... Useful Lite S 250,000 360,000 425,000 $1,035,000 10 years 9 years Indefinite Patent Goodwill The parent company uses the cost method of pre-consolidation Equity Investment bookkeeping l asset has been tested annually for impairment, and Selected accounts from the The has not been found to be impaired. ended December 31, 2016, are as follows parent, subsidiary, and consolidated financial statements for the year Parent Subsidiary Income statement: Balance sheet: Cost of goods sold Gross profit. Investment income $7,562,000 $1,650,000 Assets (5,445,000) (990,000 Cash 2,117,000 . 1,425,000 S 425.000 1239.000383 000 492,000 660,000 Accounts receivable 2,934,000 1,760,000 34,000 1.134,000)(429,000) Equity investment. $1.017.000 231,000 Property plant and equipment (PPE) net ..3,627.000910.000 $10,985,000 $2 210,000 Statement of retained earnings BOY retained earnings. $3,273,700 852,000 Liabilities and stockholders' equity $ 907,000 $ 157,000 516,000 206,000 231,000 Accounts payable. Ending retained earnings.. $4,052.000 $1,049.000 Long-term labilities Retained earnings 705,000 110,000 .. .. 2,180,000 138,000 ....4,052,000 1,049.000 $10,985,000 $2.210,000 For the year ended December 31, 2016, explain how the parent's pre-consolidation investment income of $34,000 was determined. Explain how the parent's December 31, 2016 pre-consolidation Equity Investment balance of $1,760,000 was determined. What was the subsidiary's retained earnings balance on the acquisition date? You should assume that the Common Stock and APIC have not changed since the acquisition date. (Hint: You will need to use an account that does not change after the acquisition date.) Compute the Equity Investment balance at December 31, 2016 assuming the parent company used the equity method of investment bookkeeping since the acquisition date. Prepare the [ADJ] entry that is needed in order to bring the Equity Investment from its current balance (using cost method) to the required balance (using the equity method) on January 1 2016. (Hint: You will use balance computed in Part c.) Explain the function of this consolidation entry a. b. c. d. e

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