Parent Company purchased 80 percent of Subsidiary Companys common stock on January 1, 2020. At that date, Subsidiary reported retained earnings of $160,000 and common stock of $40,000. The fair value of its buildings was $30,000 more than the book value.

Parent Company paid $200,000 to acquire Subsidiary shares. At that date, the noncontrolling interest had a fair value of $50,000. The remaining economic life of all of Subsidiarys assets was 5 years. The Net income of the subsidiary was $20,000 for the year ended 2020. The subsidiary paid out $2,000 of dividends during the year. Goodwill impairment by the end of the year was $1,000.

Hint: On scratch paper, prepare a table to calculate the differential, excess of FMV over BV, and goodwill. This will help you answer the following.

Required:

Type answers in Word file and submit in module in Canvas.

Prepare the equity method journal entries on the Parents books for the purchase of the subsidiary, parents share of subsidiary income, dividends received from subsidiary, and any amortization.

Prepare the workpaper elimination entries for the basic Investment account elimination entry, amortized excess value reclassification entry, and the excess value reclassification entry.