Please answer the following. I have no idea
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: AAP Items Initial Fair Value Useful Life (years) PPE, net 90,000 Patent 10 150,000 5 $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: 2021 2022 Transfer price for inventory sale $94,500 $70,000 Cost of goods sold -64 500 -45,000 Gross profit $30,000 $25,000 % Inventory remaining 30% 20% Gross profit deferred $9,000 $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 following financial statements at December 31, 2023: Income Statement Wondersome Philmore Sales $2,400,000 $702,400 Cost of goods sold -1,580,000 -465.400 Gross Profit 820,000 237,000 Income (loss) from subsidiary -13,200 Interest income 100,000 Interest expense -115,000 Operating expenses -711 200 -56,000 Net income $195.600 $65.000Statement of Retained Earnings Wondersome BOY Retained Earnings Philmore $3,360,350 Net income $608,000 195,600 66,000 Dividends PS -5,000 Dividends CS -85,000 -15,000 EOY Retained Earnings $3.470.950 $654.000 Balance Sheet Wondersome Philmore Assets: Cash $450,000 $84,700 Accounts receivable 484,700 113,200 Inventory 654,000 142,100 Investment in subsidiary stock 840,450 Investment in subsidiary debt 1,080,000 PPE, net 4,432, 100 2.885.000 $7.941.250 $3 225.000 Liabilities and Stockholders' Equity: Current Liabilities $505,900 $99,500 Long-term Liabilities 1,972,800 150,000 Bond payable 1,955,000 Preferred stock 50,000 Common Stock 402,000 75,300 APIC 1,589,600 241,200 Retained Earnings 3,470,950 654,000 $7.941.250 $3.225.000 a. Confirm equity income from subsidiary and the balance in the equity investment. b. Prepare the consolidating worksheet for 2023. Submit an excel spreadsheet
