parts a and b

4. Consolidation (35 points) On January 1, 2020, Wondersome Company acquired a 70% Interest in Philmore Company common stock and 20% interest in Philmore Company $50,000, 10% preferred stock for a purchase price that was $240,000 over the book value of Philmore's Stockholders' Equity on the acquisition date. Wondersome uses the equity method to account for its investment in Philmore. On the date of acquisition, Philmore's retained earnings balance was $350,000. There is no control premium. Wondersome assigned the acquisition-date AAP as follows: Useful Life (years) AAP Items PPE, net Patent Initial Fair Value 90,000 150,000 $240,000 On January 1.2021, Philmore sold equipment with a book value of $50,000 to Wondersome for $40,000. The equipment has a remaining live of 5 years. On January 1, 2022, Wondersome purchased 60% of Philmore's outstanding debt for $1,000,000. Philmore originally issued its $2,000,000, 10 year, 5% bonds on January 1, 2017 for $1,850,000. The bonds pay interest annually on December 31. Philmore sells inventory to Wondersome (upstream) which includes that inventory in products that it ultimately, sells to customers outside of the controlled group. You have compiled the following data for the years ending 2022 and 2023: Transfer price for inventory sale Cost of goods sold Gross profit % inventory remaining Gross profit deferred 2021 $94,500 -64,500 $30,000 30% $9,000 2022 $70,000 -45,000 $25,000 20% $5,000 EOY Receivable/Payable $32,000 $29,500 The inventory not remaining at the end of the year has been sold outside of the controlled group. The parent and the subsidiary report the followizy financial statements at December 31, 2023: Income Statement Wondersome $2,400,000 -1.580.000 820,000 -13,200 100,000 Philmore $702,400 465 400 237,000 Sales Cost of goods sold Gross Profit Income (loss) from subsidiary Interest income Interest expense Operating expenses Net income -711.200 $195.600 -115,000 -56,000 $66.000 Statement of Retained Earnings Wondersome $3,360,350 195,600 Philmore $608,000 66,000 BOY Retained Earnings Net income Dividends PS Dividends CS EOY Retained Earnings -5,000 -85,000 53.470.950 -15.000 $654.000 / / Balance Sheet Wondersome / / Philmore Assets: Cash Accounts receivable Inventory Investment in subsidiary stock Investment in subsidiary debt PPE, net $84,700 113,200 142,100 $450,000 484,700 654,000 840,450 1,080,000 4,432.100 $7.941.250 2.885,000 $3.225.000 $505,900 1,972,800 Liabilities and Stockholders' Equity: Current Liabilities Long-term Liabilities Bond payable Preferred stock Common Stock APIC Retained Earnings $99,500 150,000 1,955,000 50.000 75,300 241,200 654,000 $3.225.000 402,000 1,589,600 3,470,950 $7.941.250 a. Confirm equity income from subsidiary and the balance in the equity investment. b. Prepare the consolidating worksheet for 2023. Submit an excel spreadsheet. 4. Consolidation (35 points) On January 1, 2020, Wondersome Company acquired a 70% Interest in Philmore Company common stock and 20% interest in Philmore Company $50,000, 10% preferred stock for a purchase price that was $240,000 over the book value of Philmore's Stockholders' Equity on the acquisition date. Wondersome uses the equity method to account for its investment in Philmore. On the date of acquisition, Philmore's retained earnings balance was $350,000. There is no control premium. Wondersome assigned the acquisition-date AAP as follows: Useful Life (years) AAP Items PPE, net Patent Initial Fair Value 90,000 150,000 $240,000 On January 1.2021, Philmore sold equipment with a book value of $50,000 to Wondersome for $40,000. The equipment has a remaining live of 5 years. On January 1, 2022, Wondersome purchased 60% of Philmore's outstanding debt for $1,000,000. Philmore originally issued its $2,000,000, 10 year, 5% bonds on January 1, 2017 for $1,850,000. The bonds pay interest annually on December 31. Philmore sells inventory to Wondersome (upstream) which includes that inventory in products that it ultimately, sells to customers outside of the controlled group. You have compiled the following data for the years ending 2022 and 2023: Transfer price for inventory sale Cost of goods sold Gross profit % inventory remaining Gross profit deferred 2021 $94,500 -64,500 $30,000 30% $9,000 2022 $70,000 -45,000 $25,000 20% $5,000 EOY Receivable/Payable $32,000 $29,500 The inventory not remaining at the end of the year has been sold outside of the controlled group. The parent and the subsidiary report the followizy financial statements at December 31, 2023: Income Statement Wondersome $2,400,000 -1.580.000 820,000 -13,200 100,000 Philmore $702,400 465 400 237,000 Sales Cost of goods sold Gross Profit Income (loss) from subsidiary Interest income Interest expense Operating expenses Net income -711.200 $195.600 -115,000 -56,000 $66.000 Statement of Retained Earnings Wondersome $3,360,350 195,600 Philmore $608,000 66,000 BOY Retained Earnings Net income Dividends PS Dividends CS EOY Retained Earnings -5,000 -85,000 53.470.950 -15.000 $654.000 / / Balance Sheet Wondersome / / Philmore Assets: Cash Accounts receivable Inventory Investment in subsidiary stock Investment in subsidiary debt PPE, net $84,700 113,200 142,100 $450,000 484,700 654,000 840,450 1,080,000 4,432.100 $7.941.250 2.885,000 $3.225.000 $505,900 1,972,800 Liabilities and Stockholders' Equity: Current Liabilities Long-term Liabilities Bond payable Preferred stock Common Stock APIC Retained Earnings $99,500 150,000 1,955,000 50.000 75,300 241,200 654,000 $3.225.000 402,000 1,589,600 3,470,950 $7.941.250 a. Confirm equity income from subsidiary and the balance in the equity investment. b. Prepare the consolidating worksheet for 2023. Submit an excel spreadsheet