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lili lo! List Paragraph Normal No Spac 1. Assume that, on January 1, 2019, Kuchler Company acquired a 80% interest in Eastwood Company for a purchase pric that was $650,000 over the book value of the subsidiary's Stockholders' Equity on the acquisition date. Kuchler uses the co method to account for its investment in Eastwood. On the date of acquisition, Eastwood' retained earnings balance wa $100,000. Kuchler assigned the acquisition-date AAP as follows: 27 Points AAP Items Initial Fair Value Useful Life (vears) PPE $350,000 10 $35,000 Patent 100,000 5 $20,000 Customer List 150,000 5 $30,000 Goodwill 50.000 Indefinite $650,000 $85.000 80% of if the Goodwill is allocated to the parent. Kuchlet and Eastwood report the following financial statements December 31, 2022: Income Statement I Sales Cost of goods sold Gross Profit Income (loss) from subsidiary Operating expenses Net income Kuchler. $860,000 -458,000 402,000 10,000 -158,000 $254.000 Eastwood $750,000 -430,000 320,000 -165.000 S155.000 BOY Retained Earnings Net income Dividends Ending Retained Earnings Statement of Retained Earnings Kuchler $878,440 254,000 -175,000 957440 Eastwood $420,000 155,000 -12,500 $562.500 Balance Sheet Kuchler Eastwood Assets: Cash Accounts receivable Inventory Investment in subsidiary PPE, net $55,000 46,000 95,000 834,880 340.060 SL.370.940 $54,000 24,000 95,112 1.873.188 $2.046.3.00 Liabilities and Stockholders' Equity: Current Liabilities Long-term Liabilities Common Stock APIC $75,000 150,000 63,500 125.000 $400,200 790,000 118,100 175.500 States) Focus > AaBbCcDdE AaBbCcDdEe AaBbCcDdEe x Avo > = = 12v List Paragraph Normal No Spacing BOY Retained Earnings Net income Dividends Ending Retained Earnings Statement of Retained Earnings Kuchler 5878,440 254,000 -175,000 $957440 Eastwood $420,000 155,000 -12,500 $5.62.500 Balance Sheet Kuchler Eastwood Assets: Cash Accounts receivable Inventory Investment in subsidiary PPE, net $55,000 46,000 95,000 834,880 340.060 SL.370.940 S54,000 24,000 95,112 1873 188 52.046.300 Liabilities and Stockholders' Equity: Current Liabilities Long-term Liabilities Common Stock APIC Retained Earnings $75,000 150,000 63,500 125,000 957440 $1.370.940 $400,200 790,000 118,100 175,500 562.500 $2.046,300 Required: 2 Show the computation of the ADJ entry (how the number is computed). b. Prepare the consolidation journal entries. 1 Answer: a. ADJ lili lo! List Paragraph Normal No Spac 1. Assume that, on January 1, 2019, Kuchler Company acquired a 80% interest in Eastwood Company for a purchase pric that was $650,000 over the book value of the subsidiary's Stockholders' Equity on the acquisition date. Kuchler uses the co method to account for its investment in Eastwood. On the date of acquisition, Eastwood' retained earnings balance wa $100,000. Kuchler assigned the acquisition-date AAP as follows: 27 Points AAP Items Initial Fair Value Useful Life (vears) PPE $350,000 10 $35,000 Patent 100,000 5 $20,000 Customer List 150,000 5 $30,000 Goodwill 50.000 Indefinite $650,000 $85.000 80% of if the Goodwill is allocated to the parent. Kuchlet and Eastwood report the following financial statements December 31, 2022: Income Statement I Sales Cost of goods sold Gross Profit Income (loss) from subsidiary Operating expenses Net income Kuchler. $860,000 -458,000 402,000 10,000 -158,000 $254.000 Eastwood $750,000 -430,000 320,000 -165.000 S155.000 BOY Retained Earnings Net income Dividends Ending Retained Earnings Statement of Retained Earnings Kuchler $878,440 254,000 -175,000 957440 Eastwood $420,000 155,000 -12,500 $562.500 Balance Sheet Kuchler Eastwood Assets: Cash Accounts receivable Inventory Investment in subsidiary PPE, net $55,000 46,000 95,000 834,880 340.060 SL.370.940 $54,000 24,000 95,112 1.873.188 $2.046.3.00 Liabilities and Stockholders' Equity: Current Liabilities Long-term Liabilities Common Stock APIC $75,000 150,000 63,500 125.000 $400,200 790,000 118,100 175.500 States) Focus > AaBbCcDdE AaBbCcDdEe AaBbCcDdEe x Avo > = = 12v List Paragraph Normal No Spacing BOY Retained Earnings Net income Dividends Ending Retained Earnings Statement of Retained Earnings Kuchler 5878,440 254,000 -175,000 $957440 Eastwood $420,000 155,000 -12,500 $5.62.500 Balance Sheet Kuchler Eastwood Assets: Cash Accounts receivable Inventory Investment in subsidiary PPE, net $55,000 46,000 95,000 834,880 340.060 SL.370.940 S54,000 24,000 95,112 1873 188 52.046.300 Liabilities and Stockholders' Equity: Current Liabilities Long-term Liabilities Common Stock APIC Retained Earnings $75,000 150,000 63,500 125,000 957440 $1.370.940 $400,200 790,000 118,100 175,500 562.500 $2.046,300 Required: 2 Show the computation of the ADJ entry (how the number is computed). b. Prepare the consolidation journal entries. 1 Answer: a. ADJ