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 date, 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 270,000 170,000 150,000 120,000 Indefinite The Goodwill asset has been tested annually for impairment, and has not been found to be impaired. Property, plant & equipment Customer list Royalty agreement Goodwill 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 Unsold Inventory (Payable) $32,000 2016 $44,000 $12,000 2015 $64,000 $14,500 $19,000 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: Subsidiary Parent Subsidiary Income statement Sales Cost of goods sold Gross profit Income (loss) from subsidiary Operating expenses Net income Statement of retained earnings BOY retained earnings Net income Original Useful Life 10 years 8 years 8 years Parent $4,350,000 (3,050,000) 1,300,000 15,000 (830,000) $485,000 Balance sheet $800,000 Assets (480,000) Cash 320,000 Accounts receivable Inventory (200,000) Equity investment $120,000 Property, plant & equipment, net $2,000,000 $475,000 Liabilities and stockholders' equity 485,000 120,000 Accounts payable (125.000) (15.000) Other current liabilities $650,000 $320,000 560,000 180,000 850,000 250,000 1,010,000 4,000,000 420,000 $7,070,000 $1,170,000 $100,000 $350,000 400,000 125,000

Use negative signs with answers in the Consolidated column for Cost of goods sold, Operating expenses and Dividends. a. Disaggregate and document the activity for the 100% Acquisition Accoukting Premium (AAP) through December 31,2016. b. Compute the amount of the beginning of year [AD]] adjustment necessary for the consolidation of the financial statements for the year ended December 31,2016. Do not use negative signs with your answers below. c. Complete the consolidating entries according to the C-E-A-D-I sequence and complete the consolidation worksheet. Check Prepare consolidation spreadiheet for centinubus sale of inventory-Cost method far ate vean endint 2015 and 2016 . investment bobkerpine