Part A. Use the following fact pattern to answer multiple choice questions 1 through 15, with sub-instructions for particular questions: On January 1, 2018, Parent Co. acquired 80% of Sub Inc. by paying $800,000. Non-controlling interest was valued at $200,000. Sub reported common stock on that date of $520,000 with retained earnings of $352,000. A building was undervalued in the company's financial records by $18,000. This building had a ten-year remaining life. Copyrights of $80,000 were not recognized and should be amortized over 20 years. Sub earned income and paid cash dividends as follows:

Net Income Dividends Paid

2018 $115,000 $64,600

2019 $144,400 $71,600

2020 $164,000 $94,000

On December 31, 2020, the Parent owed $20,800 to Sub Inc. There have been no changes in Sub's common stock account since the acquisition. To answer questions 1 through 3, prepare the allocation of the acquisition on January 1, 2018. In your presentation, but sure to show the excess fair value over cost allocated to the identifiable assets, and any resulting goodwill. In addition, for the identifiable assets, be sure to calculate the annual amortization of excess fair value over book value.

To answer questions 4 through 7, prepare journal entries that Parent is required to record associated with the investment under the Equity Method in 2020 before consolidation.

4. The journal entry to record Sub Co.s income for 2020 would require a:

A. Debit to Equity in Sub Earnings, $131,200.

B. Credit to Equity in Sub Earnings, $164,000.

C. Credit to Equity in Sub Earnings, $131,200.

D. Debit to Investment in Sub Co., $164,000.

5. The journal entry to record the parents receipt of the Sub Co. dividend for 2020 would require a:

A. Debit to Equity in Sub Earnings, $75,200.

B. Credit to Equity in Sub Earnings, $75,200.

C. Debit to Investment in Sub. Co., $75,200.

D. Credit to Investment in Sub. Co., $75,200.

6. The journal entry to record the excess amortization for 2020 would require a:

A. Debit to Equity in Sub Earnings, $4,640.

B. Credit to Investment in Sub Co., $5,800.

C. Debit to Equity in Sub Earnings, $5,800.

D. Debit to Amortization Expense, $4,640.

7. At the end of 2020, after recording all the necessary journal entries, what is the balance in the Investment in Sub Co. account?

A. $835,680.

B. $940,640.

C. $1,140,640.

D. $937,160.