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Prepare consolidation spreadsheet for intercompany sale of equipment - Equity method Assume a parent company acquired its subsidiary on January 1, 2009, at a purchase price that was $320,000 in excess of the book value of the subsidiary's Stockholders' Equity on the acquisition date. Of that excess, $220,000 was assigned to a Customer List that is being amortized over a 10-year period. The remaining $100,000 was assigned to Goodwill. In January of 2012, the wholly owned subsidiary sold Equipment to the parent for a cash price of $116,500. The subsidiary had acquired the equipment at a cost of $140,000 and depreciated the equipment over its 10-year useful life using the straight-line method (no salvage value). The subsidiary had depreciated the equipment for 4 years at the time of sale. The parent retained the depreciation policy of the subsidiary and depreciated the equipment over its remaining 6-year useful life. Financial statements of the parent and its subsidiary for the year ended December 31, 2013 follow in part f. below. The parent uses the equity method to account for its Equity Investment. The Customer List was amortized as part of the parent's equity method accounting. a. Prepare the journal entry that the subsidiary made to record the sale of the equipment to the parent, the journal entry that the parent made to record the purchase, and the [I] entries for the year of sale. Note: Round answers to the nearest whole number. Journal Entries Description Subsidiary: Cash Accumulated depreciation Gain on sale of equipment Property, plant & equipment Property, plant & equipment Cash Gain on sale of equipment Property, plant & equipment Accumulated depreciation [ldepr) Accumulated depreciation Depreciation Expense Debit DX Credit 0 DX 0 0 X 0 D OX Parent: DX 0 0 0 X 0 [lgain) DX DX 0 0 DX D OX 0 0 x b. Compute the remaining portion of the deferred gain on January 1, 2013. Round your answer to nearest whole number. $ 0 X c. Show the computation to yield the $127,417 of Income (loss) from subsidiary reported by the parent for the year ended December 31, 2013. Note: Use a negative sign with an answer to indicate a reduction in the computation. Net income of subsidiary AAP Depreciation OX Deferred gain on intercompany sale 0 x Income (loss) from subsidiary 0 x d. Compute the Equity Investment balance of $816,334 on December 31, 2013. Note: Use a negative sign with an answer to indicate a reduction in the computation. Common stock APIC EOY Retained earnings EOY Unamortized AAP Gain on intercompany sale Equity investment 0 x OX OX OX OX OX OX > > > > > e. Prepare the consolidation entries for the year ended December 31, 2013. Consolidation Worksheet Description Debit Credit [C] Income (loss) from subsidiary 0 Dividends 0 OX Equity investment 0 OX [E] Common stock OX 0 APIC 0X 0 Retained earnings OX 0 Equity investment 0 0 x Customer list 0 x 0 Goodwill 0x 0 Equity investment 0 0 x [D] Operating expenses OX 0 Customer list 0 0 x [lgain] Equity Investment 0 Property, plant & equipment OX Accumulated depreciation 0 Ox [ldepr] Accumulated depreciation 0 X 0 Depreciation Expense 0 OX [A] > > > > 0 > > > > $ $ OX $ 0 X $ 0 X f. Prepare the consolidation spreadsheet for the year ended December 31, 2013. Use negative signs with answers in the consolidated column for Cost of goods sold, Operating expenses and Dividends. Elimination Entries Income statement Parent Sub Dr Cr Consolidated Sales $10,000,000 $1,004,000 $ Cost of goods sold (7,200,000) (600,000) 0 x Gross profit 2,800,000 404,000 0 x Income (loss) from subsidiary 127,417 [C] 0 x 0 Operating expenses (1,500,000) (260,000) [D] OX 0 x [ldepr) 0 x Net income $1,427,417 $144,000 0 X Statement of retained earnings: BOY retained earnings $5,814,300 $225,000 [E] Net income 1,427,417 144,000 OX Dividends (285,200) (20,000) 0 XC 0 X EOY retained earnings $6,956,517 $349,000 Balance sheet: Assets Cash $1,058,100 $326,000 $ 0X Accounts receivable 1,750,000 430,000 0X Inventory 2,600,000 550,000 0 x PPE, net 10,060,000 1,030,000 (gain) OX 0 x [lgain) 0 % [ldepr] 0 x Customer List [A] 0 X [D] 0 X Goodwill [A] 0 X Equity investment 816,334 [lgain) 0 x 0 x [C] 07 0X [E] 0X [A] $16,284,434 $2,336,000 $ 0X Liabilities and stockholders' equity Accounts payable $1,010,000 $178,000 $ 0 X $ annan [E] OX $ OX OX $5,814,300 $225,000 1,427,417 144,000 (285,200) (20,000) $6,956,517 $349,000 0 x [C] OX $ OX Statement of retained earnings: BOY retained earnings Net income Dividends EOY retained earnings Balance sheet: Assets Cash Accounts receivable Inventory PPE, net $ OX OX OX 0X 0 x [lgain] 0X $1,058,100 $326,000 1,750,000 430,000 2,600,000 550,000 10,060,000 1,030,000 [lgain] [ldepr] [A] [A] 816,334 [lgain] OX OX 0 x (D) OX Customer List Goodwill Equity investment 0 X OX 0 0 x [C] 0x (E) 0X [A] $16,284,434 $2,336,000 $ 0 X $ 0 X 0 x Liabilities and stockholders' equity Accounts payable Other currentliabilities Long-term liabilities Common stock APIC Retained earnings 0X $1,010,000 $178,000 1,190,000 230,000 2,500,000 1,300,000 553,000 124,000 4,074,917 155,000 6,956,517 349,000 $16,284,434 $2,336,000 0X OX [E] [E] 0 x 0 X OX $ 0 X $ 0 x $ Check