Prepare consolidation spreadsheet for continuous sale of inventory- Cost method

A parent company acquired 100 percent of the stock of a subsidiary company on January 1, 2015, for $1,020,000. On this date, the balances of the subsidiary 's stockholders' equity accounts were Common Stock, $60,000, Additional Paid-in Capital, $75,000, and Retained Earnings, $735,000. On the acquisition date, the excess was assigned to the following AAP assets:

	Original Amount	Original UsefulLife
Property, plant, and equipment, (PPE), Net	48,000	10 years
Customer List	30,000	8 years
Patent	72,000	12 years
	150,000

As indicated by the AAP schedule, there was no Goodwill included in the acquisition.Assume the wholly owned subsidiary company sells inventory to the parent. The parent, ultimately, sells the inventory to customers outside of the consolidated group. You have compiled the following data for the years ending 2018 and 2019:

	Inventory Sales	Gross profit remaining in unsold inventory	Receivable(Payable)
2019	60,000	8,400	23,400
2018	48,00	7,200	21,000

The inventory not remaining at the end of a given year is sold to unaffiliated entities outside of the consolidated group during the next year. The parent uses the cost method of pre-consolidation Equity Investment bookkeeping. The financial statements of the parent and its subsidiary for the year ended December 31, 2019, follow:

a. Compute the amount of the beginning of year [ADJ] adjustment necessary for the consolidation of the financial statements for the year ended December 31, 2019.

b. Complete the consolidating entries according to the C-E-A-D-1 sequence

Parent ParentSubsidiary Incomestatement Sales. Cost of goods sold Balancesheet: $5,760,000 780,000 (4,020,000) (480,000) 420,000 $240,000 720,000 1,080,000 1,020,000 Gross profit 1,740,000 180,000 300,000 210.000 qi vestment $ 90000 Total assets 360,000 3000,000 480.000 $8.240,000 $1,280,000 Income (loss) from subsidiary 30,000 PPE, net Net income Liabilities and stockholders' equity Accounts payable Other current liabilities Long-term habilties Retained earnings s 90,000 120,000 $ 420,000 540,000 900,000 360,000 600,000 3,420 ,000 $2,880,000 $855,000 90,000 690,000 APC tock Retained earnings 60,000 75,000 915,000 Ending retaimed eanings Total liabilities and equity $6,240,000 1, $1,260,000