Prepare consolidation spreadsheet for inter company sale of equipment-equity method
Chapter 4 1 Consolidabed Financial Statements and Intercompany Transactions 255 t Prepare consolidation spreadsheet for intercompany sale of equipment- Equity method Assume that a parent compamy acquired its subsidiary on January 1, 2013, at a purchase price that was 5600,000 in excess of the book value of the subsidiary's Stockholders Equity on the acquisition date. Of that excess, $100,000 was assigned to a Patent, and $200,000 to an unrecoeded Customer List owned by the subsidiary. The Patent asset is being depreciated over its 10-year legal life and the Customer List is being amortized over a S-year period. Amoetiration is coeputed on a straight-line basis with no ce of 5300,000 of the parchase price was assigned to Goodwill. In January 2015, the parent sold Equipment to its wholly owned subsidiary for a cash price of s150,000. The parent had acquired the equipment at a cost of $175,000 and depreciated the equipment over its 10-year useful life using the straight-line method (no salvage valuc). The parent had depreci- ated the equipment for S years at the time of sale. The subsidiary retained the depreciation policy of the parent y of and depreciated the equipment over its remaining 5 year useful life. Following are financial statements of the pareet and its subsidiary for the year ended December 31 2016. The parent uses the equity method to account for its Equity Investment. The Customer List and Patent assets were amortized as part of the parent's equity method accounting. t and Parent Subsidiary Income statement Balance sheet .$8920,000 $2,548,000 Assets Cost of goods sold Gross prolit ncome floss) from subsidary. Operating expenses Net income ...5.422,40 (1.528,800) Cash $ 167,196 $ 508.056 1561,000 1,095.840 2,319,200 1,401,400 2,497,600 1,019200 Accounts receivable 280 319,220 .(1.338,000) (662.480 PPE net 8973,520 2.824,440 $1.476.820 356 720 Equty investment 032 14973,38 $5,829.536 Statement of retained earnings BOY retained earnings $5213,1 16 1.478820 295,764) s 573.300 356,720 uat!ties and stockholders' ty 928 $ 900,920 453,544 ,061,480$86,040 2,500,000 3,000,000 315,962 94.940 6,396,172 879,060 50,960) Oher oument labilities Y retained earring $6.396.172 879,060 Long-term liablities _ common stock. 780 3,621,520 Reared ngs $14,973.368 $5.629.536 Prepare the journal entry that the parent made to record the sale of the equipment to the subsidiary, the jounal entry that the subsidiary made to record the purchase, and the 11) entries for the year of sale. Compute the remaining portion of the deferred gain at January 1, 2016 Show the coemputation to yield the $319,220 of lncome (loss) froes subsidiary reported by the pareat for the year ended December 31, 2016. Compute the Equity Investment balance of $1,952,452 at December 31, 2016 Prepare the consolidation entries for the year ended December 31, 2016. Prepare the consolidation spreadsheet for the year ended December 31, 2016 he
