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Prepare consolidation entries for the upstream sale of the equipment. The parent company acquired 75% of the subsidiary on January 1, 2011. On the acquisition

Prepare consolidation entries for the upstream sale of the equipment.

The parent company acquired 75% of the subsidiary on January 1, 2011. On the acquisition date, the fair value of the subsidiary assets exceeded book value by $350,000. All of that excess was allocated to a Royalty Agreement (there is no Goodwill). The Royalty Agreement has a 7-year remaining useful life on the acquisition date, with no salvage value and straight line amortization. In January, 2014 the subsidiary sold equipment to the parent for a cash price of $250,000. The subsidiary acquired the equipment at a cost of $480,000. Using a 10 year life, with no salvage value, the equipment had been depreciated for 6 full years prior to the date of sale. The parent will depreciate the equipment purchased over the remaining 4 years. The financial statements provided are for the year ended December 31, 2016.

Parent Subsidiary
Income Statement
Sales 3,400,000 900,000
Cost of Goods Sold (2,400,000) (500,000)
Gross Profit 1,000,000 400,000
Income (loss) from subsidiary 85,875
Operating Expenses (522,000) (250,000)
Net Income 563,875 150,000
Consolidated NI attrib to NCI
Consolidated NI attrib to CI
Statement of Ret Earnings:
Beg. Ret. Earn. 1,799,750 200,000
Consolidated NI attrib to CI 563,875 150,000
Dividends Declared (100,000) (30,000)
Ending Retained Earnings 2,263,625 320,000
Balance Sheet
Cash 619,500 250,000
Accounts receivable 530,000 420,000
Inventories 900,000 550,000
Equity investment 454,125
PPE, net 3,500,000 1,000,000
Royalty agreement
Total Assets 6,003,625 2,220,000
Accounts Payable 340,000 250,000
Other current liabilities 400,000 300,000
Long-term liabilities 1,500,000 1,100,000
Common Stock 200,000 100,000
APIC 1,300,000 150,000
Retained Earnings 2,263,625 320,000
Noncontrolling Interest
Total Liabilities and Equity 6,003,625 2,220,000

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