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, 2013, for $800,000. On this clate, the balances of the subsidiary's stockholders' equity accounts were Common Stock, $50,000, Additional Paid-in Capital, $55,000, and Retained Earnings, $195,000. On the acquisition date, the excess was assigned to the following AAP assets: Original Amount Original Useful Life Property, plant & equipment 250,000 10 years Customer list Royalty agreement Goodwill 150,000 years 140,000 8 years 120,000 Indefinite The Goodwill asset has been tested annually for impairment, and has not been found to be impaired. Assume that the parent company sells inventory to its wholly owned subsidiary. The subsidiary, ultimately, sells the inventory to customers outside of the consolidated group. You have compiled the following data for the years ending 2015 and 2016: Inventory Gross Profit Remaining in Receivable Sales 2016 $43,000 2015 $63,000 Unsold Inventory $11,000 $13.500 (Payable) $31,000 $18,000 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, 2016, follow: Parent Subsidiary Parent Subsidiary Income statement Sales Cost of goods sold Balance sheet $1.350,000 $800,000 Assets (3,050,000) (480,000) Cash $650,000 $310,000 Gross profit 1,300,000 Income (loss) from subsidiary 15,000 Operating expenses (830,000) Net income $185,000 320,000 Accounts receivable Inventory (200,000) Equity investment $120,000 Property, plant & equipment 560,000 180,000 850,000 250.000 Statement of retained earnings BOY retained earnings $2,000,000 Net income 185,000 Dividends (125,000) Ending retained earnings. $2,360,000 $465,000 Liabilities and stockholders' equity 120.000 Accounts payable (15.000) Other current liabilities $570,000 Long-term liabilities Common stock AFIC Retained earnings 980,000 4,000,000 420,000 $7,040,000 $1,160,000 $350,000 $100,000 400,000 125.000 2,500,000 260,000 700,000 730,000 50,000 55,000 2,360,000 570.000 $7,040,000 $1,160,000