Prepare consolidation spreadsheet for continuous sale of inventoryCost method

Question 9 complete Marked out of 163.00 Fluggestion 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, 2016, for $560,000. On this date, the balances of the subsidiary's stockholders equity accounts were common stock, 535,000, Additional Paid in Capital, $38.500, and Retained Earnings, 5136,500. On the acquisition date, the excess was assigned to the following AP assets Original Amount Original Useful Life Property, plant & equipment $140.000 Customer 70.000 Royalty agreement 56.000 Goodwill 84.000 Indefinite $350.000 The Goodwill asset has been tested annually for impairment, and has not been found to be impaired Assume 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 2018 and 2019 Inventory Gross Profit Remaining in Receivable Unsold inventory Payable 2010 542,000 55,600 2018 $20,000 10 years 8 years 8 years Sales $19.000 $10.500 37,350 Inventory Gross Profit Remaining in Receivable Sales Unsold Inventory (Payable) 2019 542.000 55.600 $19.500 2018 28.000 $7.950 $10.500 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. Parent Subsidiary Parent Subsidiary Income statement Balance sheet Sales 53.045,000 3560,000 Assets Cost of goods sold 12.135.0001336,0001 Cash 5455.000 $175.000 Gross profit 910.000 224,000 Accounts receivable 392,000 126.000 Operating expenses 1581,000) 140,000 Inventory 595,000 175.000 Income (oss from subsidiary 10,500 Equity investment 560,000 Net income 5339.500 584,000 Property, plant equipment 2.800,000 294.000 Statement of retained earnings 54,802,000 $770.000 BOY retained earring $1,400,000 $283.500 Labies and stockholders' equity Net Income 339,500 84,000 Accounts payable 5.245,000 570,000 Dividends 187.500 (10,5001 Other current liabilities 280.000 87.500 Ending retained earning $1,652.000 5357.000 Long term Kabiles 1,750,000 182,000 Common stock 490,000 35,000 APC 385.000 38500 Retained earnings 1.682,000 357,000 14,802,000 5770.000 APIC Retained earning 385.000 38.500 1,652,000 357,000 54.800,000 $270,000 a. Disaggregate and document the activity for the 100% Acquisition Accounting Premium (AAP) through December 31, 2019. 2016 2019 100% AAP Amortization. Dr (CN) Property plant and equipment PPE.net Customer List Royalty Agreement Goodwill Net amortization Year ended December 31 2017 2018 OS OS 0.5 0 0 0 0 0 0 0 0 0 OS 05 0 0 0 2016 December 31, 2017 2018 OS jan. 1 100% Unamortised AAP. Dr(CH) 2016 Property, plant and equipment PPE.net 5140,000 Customer List 70,000 Royalty Agreement 56.000 Goodwill $4,000 Net named $350,000 $ 05 0 0 0 OS 2019 OS 0 0 0 0 OS 0 0 0 OS b. 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, Do not use negative signs with your answers below Thnh - TH H 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, 2019. Do not use negative signs with your answers below. Change in the BOY 0 Cumulative AD amor thru BOY 0 BOYUpstream IP ADJ Amount 5 Debit Credi c. Complete the consolidating entries according to the C-E-A-D-1 sequence and complete the consolidation Worksheet. Consolidation Journal Description TADO . 0 10 . . 0 BOY Como Mockutsidarys BOY APK Obsidiary o 0 O O a O 0 IA 0 0 PPE Customer Royalty Agreement 0 0 0 . 0 0 0 . 0 0 143 0 PPE.net Customer list Royalty Agreement 0 0 0 0 0 0 0 0 1.00 ID! 0 0 0 0 0 0 Customer List Royalty Agreement 0 O Icogs O 0 0 0 sales 0 . To recoonide prior year profit on intercompany sales . . . . To defer current period profit on intercompany sales 0 . 0 0 fo 0 0 0 Inay! 0 0 Use negative signs with answers in the Consolidated column for Cost of goods sold Operating expenses and Dividends. Consolidation Worksheet Income statement Parent Subsidiary Debit Credit Consolidated o o O O OOOO 0 OOO OC Use negative signs with answers in the Consolidated column for Cost of goods sold, Operating expenses and Dividends. Consolidation Worksheet Income statement Parent Subsidiary Debit Credit Consolidated Sales 53,045,000 $560.000 [lsales] 0 Cost of goods sold (2,135.000) (336,000) [icogsi 0 0 [cogs 0 0 [sales] Gross profit 910.000 224,000 Equity income 10.500 [C] Operating expenses (581.000) (140,000) [D] Net income $339,500 $84,000 $ Statement of retained earnings BOY retained earnings $1,400.000 $283.500 [E] O [ADN $ Net income 339.500 84.000 Dividends (87.500) (10,500) Ending retained earnings 51.652.000 $357,000 $ 0 Balance sheet Assets Cash $455,000 $175.000 $ Accounts receivable 392.000 126,000 olpayl Inventory 595,000 175,000 0 [cogs] Equity investment 560,000 TADJI O [E] [lcogsi 0 (A) PPE, net 2.800.000 294,000 [A] 0 [D] Customer List O [D] Royalty Agreement [A] O [D] Goodwill [A] 54,802.000 $770,000 $ Liabilities and equity Accounts payable $245.000 570.000 pay] $ Other currentilabilities 280,000 87,500 Long-term liabilities 1.750.000 182.000 Common stock 490.000 35,000 [E] APIC 385,000 38,500 Retained earnings 1,652.000 357.000 $4,802.000 5770,000 $ OS $ OOOO O O O O O O O O O olo 0 OOO OOO OO 0 0 Check