Option #2: Consolidation at the end of the first year subsequent to date of acquisition (purchase price greater than book value)

Assume that a parent company acquires its subsidiary on 1/1/xx, by exchanging 41,500 shares of its $1 par value common stock, with a market value on acquisition date of $36 per share, for all of the outstanding voting shares of the subsidiary. You have been charged with preparing the consolidation of these two entities at 12/31/xx.

On acquisition date (1/1/xx), all of the subsidiarys assets and liabilities had fair values equaling their book values except PPE assets are undervalued by $81,000 (depreciation =$5,400 per year), the subsidiary has an unrecorded patent with a fair value of $261,000 (amortization = $32,625 per year) and the parent records $162,000 of goodwill in the transaction.

Submission Requirements:

Using the ACT470_Mod02-Option02.xlsx Excel spreadsheet in the Module 2 folder:

• Prepare the consolidated balance sheet at 12/31/xx 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] or [A] or [D] entry.
• Use Excel formulas to derive the Consolidated column amounts and totals.
• Using the Home key in Excel, go to the Styles area and highlight the [C], [E], [A] and [D]cell entries in different shades.
• Review the grading rubric following this assignment, to understand how you will be graded on this assignment. Reach out to your instructor if you have questions about the assignment.

Consolidation Entries Subsidi Consoldated Parent Dr Cr Income Statement 4,950,0001485,000 Sales (891,000) 3,465,00D Cost of gooissold Gross profit 1485,0CD 594,C0O Equity income 169.875 940,500 386,100 Operating expenses Net income 714,375 207,900 Statement of retained eamings BOY retained eamings 2,5J040U0 767,50 Net income 714,375 207,900 Dvdends (144,180] (31,185] Ending retained eamings 3,140,55 943,9i5 Balance sheet Assets Cash 215,355 382,635 Accounts receivable 633,6E0 344,520 Irwerntory 960,300 442,530 Equity inwestment 1,632,690 Property, plant and equipment (PPE), net 3,629,340 818,130 Patent Goodhwill 1,131,2851,988415 Liabilrties and stockholders equity Accounts payable 362,340 141,5T0 Acorued liabilities 430,650 185,130 Long-term liabilrties 495,010 Common stock 566,100 99.0EH APIC 2,631,6tC 123,750 Retained eamings 3,140,55 943,9i5 1,131,2851988415