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Consolidation subsequent to date of acquisition - Equity method with noncontrolling interest and AAP Assume that, on January 1, 2009, a parent company acquired an 80% interest in its subsidiary. The total fair value of the controlling and noncontrolling interests was $500,000 over the book value of the subsidiary's Stockholders' Equity on the acquisition date. The parent assigned the excess to the following [A] assets: CA] Asset Initial Fair Value Useful Life (years) Initial Useful [A] Asset Fair Value Life (years) Property plant and equipment (PPE), net 595,000 10 Customer list 155,000 10 Goodwill 250,000 Indefinite $500,000 80% of the Goodwill is allocated to the parent. The parent and the subsidiary report the following financial statements at December 31, 2013: Parent Subsidiary Parent Subsidiary Income statement: Balance sheet: Sales 57,330,000 $1,871,500 Assets Cost of goods sold (5,131,000) (1,122,300) Cash $412,113 $132.511 Gross Accounts profit 2,199,000 749,200 receivable 938,240 433,956 Income (loss) from subsidiary 190,296 Inventory 1,422,020 557,409 Operating Equity expenses (1,392,700) (486,330) investment 1,476,471 Property plant and Net equipment income $996,596 262,870 (PPE), net 5,374,356 1,280,669 $9,623,200 $2,404,545 Statement of retained earnings: Liabilities BOY and retained stockholders' earnings $3,682,592 $966,425 equity Net Current income 996,596 262,870 liabilities $1,053,321 $433,956 Long-term Dividends (199,159) (39,281) liabilities 2,000,000 500,000 EOY retained Common earnings $4,480,029 $1,190,014 stock 1,198,455 124,700 APIC 891,395 155,875 Retained earnings 4,480,029 1,190,014 $9,623,200 $2,404,545 2013 Amortization 9,500 15,500 07 Unamortized 1/1/2014 47,500 77,500 25,000 x 375,000 25,000 a. Disaggregate and document the activity for the 100% Acquisition Accounting Premium (AAP), the controlling interest AAP and the noncontrolling interest AAP. Note: Do not use negative signs with any of your answers below. Unamortized Unamortized Unamortized Unamortized Unamortized 2009 2010 2011 2012 1/1/2009 Amortization 1/1/2010 Amortization 1/1/2011 Amortization 1/1/2012 Amortization 1/1/2013 Property, plant and equipment (PPE), net 95,000 9,500 85,500 9,500 76,000 9,500 66,500 9,500 57,000 Customer list 155,000 15,500 139,500 15,500 124,000 15,500 108,500 15,500 93,000 Goodwill 250,000 0 250,000 0 250,000 0 250,000 0 250,000 500,000 25,000 475,000 25,000 450,000 25,000 425,000 25,000 400,000 Parent: Property, plant and equipment (PPE), net 76,000 7,600 68,400 7,600 60,800 7,600 53,200 7,600 45,600 Customer list 124,000 12,400 111,600 12,400 99,200 12,400 86,800 12,400 74.400 Goodwill 200,000 0 200,000 0 20,000 x 0 200,000 0 200,000 400,000 20,000 380,000 20,000 360,000 20,000 340,000 20,000 320,000 Subsidiary: Property, plant and equipment (PPE), net 19,000 1,900 17,100 1,900 15,200 1,900 13.300 1,900 11,400 Customer list 31,000 31,000 x 279,000 x 3,100 24,800 3,100 21,700 3,100 18,600 Goodwill 50,000 0 50,000 07 50,000 0 50,000 50,000 100,000 5,000 95,000 5,000 90,000 5,000 85,000 80,000 7,600 12,400 38,000 62,000 200,000 300,000 20,000 1,900 3,100 0 5,000 9,500 15,500 50,000 75,000 5,000 b. Calculate and organize the profits and losses on intercompany transactions and balances. Downstream Upstream Jan. 1, 2013 Intercompany transaction X 0 0 Dec 31, 2013 Intercompany transaction X 0 C. Compute the pre-consolidation Equity Investment account beginning and ending balances starting with the stockholders' equity of the subsidiary. Round answers to the nearest whole number. 0 x Equity investment at 1/1/13: Common stock APIC Retained earnings 0 X 0 X 0 x 0 X Equity investment at 12/31/13: Common stock APIC Retained earnings 0 X 0 X 0X 0 x 0 x 0 x 0 x 0X Consolidated: Parent's stand-alone net income Subsidiary's stand-alone net income Less: X Subsidiary's adjusted stand-alone net income Consolidated net income Parent: Parent's stand-alone net income Subsidiary's stand-alone net income Less: e X 80% of subsidiary's stand-alone net income Consolidated net income attributable to the parent Subsidiary: 20% of subsidiary's stand-alone net income Less: : X 0 x OX OX 0 x 0X 0 x 0 x 0 x g. Complete the consolidating entries according to the C-E-A-D-1 sequence. Consolidation Worksheet Description Debit [C] Equity income 0X Credit 0 X 0X 0 0 0 x Dividends Equity investment 0 0 x + x 0 0 x 0 X 0 [E] Common stock E APIC 0 X 0X x 07 0 X Equity investment 0 x X 0 OX 0 X 0 [A] Property, plant and equipment (PPE), net Customer list 0 0 x 0 Equity investment 0 * X [D] X 0 0 0 X OX Customer list 0 0 X x