Part 1. 1. Bridget Co. acquired 80% of Bats and More Co. common stock on 01/01/2020. There is no difference between book value and market value for Bats and More's assets and no goodwill when Bridget acquired Bats and More. During 2021, Bats and More Co. sold to Bridget inventory that costs $200,000 for $240,000. By the end of 2021 , Bridget sold 60% of those inventory to outside customers. In addition, during 2021, Bridget sold to outside customers all of the inventory that was carried from 2020. The inventory carried from 2020 was originally sold by Bats and More to Bridget for $50,000. The cost of the inventory for Bats and More was $40,000. Also remember that on 01/01/2020 right after acquisition, Bats and More sold a piece of equipment to Bridget for $20,000. The equipment was originally purchased by Bats and More for 30,000 and has accumulated depreciation of $15,000 on 01/01/2020. The equipment is depreciated by Bridget with straight-line method based on a 5 year useful life (i.e. 2020-2024, inclusive). Assume that Bats and More would depreciate the equipment by $3,000 per year if it had not sold the equipment. Bats and More made net income of $60,000 and paid $40,000 dividend in 2021 . There are no other intercompany transactions in 2021 other than the sales of inventory and equipment. Using the above information, please use the acquisition method to consolidate the books of Bridget and Bats and More Co. on 12/31/2021, assuming that Bridget records its investment in subsidiary with the equity method. Bridget's accounting entries on its investment accounts under equity method at end of 2021 Investment in Bats and More Equity in Bats and More's earnings Cash Investment in Bats and More Equity in subisidiary earnings Investment in Bats and More Investment in Bats and More Equity in subisidiary earnings Equity in subisidiary earnings Investment in Bats and More Investment in Bats and More Equity in subisidiary earnings Investment in Bats and More 1/1/2021 balance 164800 12/31/2021 balance adjustment for subsidiary's net income adjustment for subsidiary's dividend adjustment for unrealized gain from sale of inventory in 2021 adjustment for gain in sale of inventory carried from 2020 adjustment for unrealized gain from sale of equipment in 2020 adjustment for 2021 depreciation expense for the equipment sold in 2020 Equity in Subsidiary earnings Bats and More 2021 earnings realized gain from sale of inventory carried over from 2020 unrealized gain from 2021 inventory sale gain from tranfer of equipment in 2020 adjustment to depreciation exp. for transferred equipment total 2021 Equity in subsidiary earnings Bridget COMPANY AND CONSOLIDATED SUBSIDIARY Consolidation Worksheet December 31, 2021 Bridget Bats and More Consolidation Entries Noncontroling Consolidated Bridget COMPANY AND CONSOLIDATED SUBSIDIARY Consolidation Worksheet December 31, 2021 2. On 01/01/2020, Bridget Co. purchase 80% of Bats and More Co. common stock for $160,000 cash. Assume that the purchase price equals the net assets fair value of Bats and More and the book values of all the assets and liabilities of Bats and More Co. equal to their fair value. On 01/01/2020 right after the acquisition, Bridget paid $103,387 to buy bonds originally issued by Bats and More from open market. The purchase price implies an effective interest rate of 7% for the bonds. Bats and More issued the bonds with a 5 -year life, a face value of $100,000 and coupon rate of 8% on 01/01/2019 for $88,913, which implied an effective interest rate of 11%. The coupon was paid at the end of each year. Using the above information, please use the acquisition method to consolidate the books of Bridget Co. and Bats and More Co. on 12/31/2021, assuming that Big records its investment in subsidiary with the Sophisticated equity method. Gain/loss on retirement of bonds in 2021 Ending balance for 2021 Difference between bond interest income\&expense Bridget COMPANY AND CONSOLIDATED SUBSIDIARY Consolidation Worksheet December 31, 2021