Prepare consolidation spreadsheet for intercompany sale of equipment Equity method Assume a parent company acquired its subsidiary on January 1, 2009, at a purchase price that was $310,000 in excess of the book value of the subsidiary's Stockholders' Equity on the acquisition date Of that excess, $210,000 was assigned to a Customer List that is being amortized over a 10 year period The remaining $100,000 was assigned to Goodwill In January of 2012, the wholly owned subsidiary sold Equipment to the parent for a cash price of $122,500 The subsidiary had acquired the equipment at a cost of $140,000 and depreciated the equipment over its 10 year useful life using the straight line method (no salvage value) The subsidiary had depreciated the equipment for 4 years at the time of sale The parent retained the depreciation policy of the subsidiary and depreciated the equipment over its remaining 6 year useful life Financial statements of the parent and its subsidiary for the year ended December 31, 2013 follow in part f below The parent uses the equity method to account for its Equity Investment The Customer List was amortized as part of the parent's equity method accounting a Prepare the journal entry that the subsidiary made to record the sale of the equipment to the parent, the journal entry that the parent made to record the purchase, and the I entries for the year of sale Note Round answers to the nearest whole number Journal Entries Description Debit Credit Subsidiary Cash CashProperty, pant equipmentAccumulated depreciationCustomer listGoodwillGain on sale of equipmentLoss on sale of equipmentEquity investmentNet income of subsidiaryAAP DepreciationDeferred gain on intercompany saleOperating expensesDepreciation of AAP assetCommon stockAPICRetained earningsBOY unamortized AAPDividends CashProperty, pant equipmentAccumulated depreciationCustomer listGoodwillGain on sale of equipmentLoss on sale of equipmentEquity investmentNet income of subsidiaryAAP DepreciationDeferred gain on intercompany saleOperating expensesDepreciation of AAP assetCommon stockAPICRetained earningsBOY unamortized AAPDividends Property, plant equipment Parent CashProperty, pant equipmentAccumulated depreciationCustomer listGoodwillGain on sale of equipmentLoss on sale of equipmentEquity investmentNet income of subsidiaryAAP DepreciationDeferred gain on intercompany saleOperating expensesDepreciation of AAP assetCommon stockAPICRetained earningsBOY unamortized AAPDividends CashProperty, pant equipmentAccumulated depreciationCustomer listGoodwillGain on sale of equipmentLoss on sale of equipmentEquity investmentNet income of subsidiaryAAP DepreciationDeferred gain on intercompany saleOperating expensesDepreciation of AAP assetCommon stockAPICRetained earningsBOY unamortized AAPDividends Igain CashProperty, pant equipmentAccumulated depreciationCustomer listGoodwillGain on sale of equipmentLoss on sale of equipmentEquity investmentNet income of subsidiaryAAP DepreciationDeferred gain on intercompany saleOperating expensesDepreciation of AAP assetCommon stockAPICRetained earningsBOY unamortized AAPDividends Property, plant equipment CashProperty, pant equipmentAccumulated depreciationCustomer listGoodwillGain on sale of equipmentLoss on sale of equipmentEquity investmentNet income of subsidiaryAAP DepreciationDeferred gain on intercompany saleOperating expensesDepreciation of AAP assetCommon stockAPICRetained earningsBOY unamortized AAPDividends Idepr CashProperty, pant equipmentAccumulated depreciationCustomer listGoodwillGain on sale of equipmentLoss on sale of equipmentEquity investmentNet income of subsidiaryAAP DepreciationDeferred gain on intercompany saleOperating expensesDepreciation of AAP assetCommon stockAPICRetained earningsBOY unamortized AAPDividends CashProperty, pant equipmentAccumulated depreciationCustomer listGoodwillGain on sale of equipmentLoss on sale of equipmentEquity investmentNet income of subsidiaryAAP DepreciationDeferred gain on intercompany saleOperating expensesDepreciation of AAP assetCommon stockAPICRetained earningsBOY unamortized AAPDividends b Compute the remaining portion of the deferred gain on January 1, 2013 Round your answer to nearest whole number $Answer c Show the computation to yield the $127,417 of Income (loss) from subsidiary reported by the parent for the year ended December 31, 2013 Note Use a negative sign with an answer to indicate a reduction in the computation Net income of subsidiary AAP Depreciation CashPPE, netAccumulated depreciationCustomer listGoodwillGain on sale of equipmentLoss on sale of equipmentEquity investmentNet income of subsidiaryAAP DepreciationDeferred gain on intercompany saleOperating expensesDepreciation of AAP assetCommon stockAPICRetained earningsBOY unamortized AAPDividends Equity income d Compute the Equity Investment balance of $805,334 on December 31, 2013 Note Use a negative sign with an answer to indicate a reduction in the computation Common stock APIC EOY Retained earnings EOY Unamortized AAP Gain on intercompany sale Equity investment e Prepare the consolidation entries for the year ended December 31, 2013 Consolidation Worksheet Description Debit Credit C CashProperty, pant equipmentAccumulated depreciationCustomer listGoodwillGain on sale of equipmentLoss on sale of equipmentEquity investmentNet income of subsidiaryAAP DepreciationDeferred gain on intercompany saleDepreciation expenseDepreciation of AAP assetIncome (loss) from subsidiaryCommon stockAPICRetained earningsBOY unamortized AAPDividends Dividends CashProperty, pant equipmentAccumulated depreciationCustomer listGoodwillGain on sale of equipmentLoss on sale of equipmentEquity investmentNet income of subsidiaryAAP DepreciationDeferred gain on intercompany saleDepreciation expenseDepreciation of AAP assetCommon stockAPICRetained earningsBOY unamortized AAPDividends E CashProperty, pant equipmentAccumulated depreciationCustomer listGoodwillGain on sale of equipmentLoss on sale of equipmentEquity investmentNet income of subsidiaryAAP DepreciationDeferred gain on intercompany saleDepreciation expenseDepreciation of AAP assetCommon stockAPICRetained earningsBOY unamortized AAPDividends APIC Retained earnings CashProperty, pant equipmentAccumulated depreciationCustomer listGoodwillGain on sale of equipmentLoss on sale of equipmentEquity investmentNet income of subsidiaryAAP DepreciationDeferred gain on intercompany saleDepreciation expenseDepreciation of AAP assetCommon stockAPICRetained earningsBOY unamortized AAPDividends A Customer list CashProperty, pant equipmentAccumulated depreciationCustomer listGoodwillGain on sale of equipmentLoss on sale of equipmentEquity investmentNet income of subsidiaryAAP DepreciationDeferred gain on intercompany saleDepreciation expenseDepreciation of AAP assetCommon stockAPICRetained earningsBOY unamortized AAPDividends CashProperty, pant equipmenttAccumulated depreciationCustomer listGoodwillGain on sale of equipmentLoss on sale of equipmentEquity investmentNet income of subsidiaryAAP DepreciationDeferred gain on intercompany saleDepreciation expenseDepreciation of AAP assetCommon stockAPICRetained earningsBOY unamortized AAPDividends D CashProperty, pant equipmentAccumulated depreciationCustomer listGoodwillGain on sale of equipmentLoss on sale of equipmentEquity investmentNet income of subsidiaryAAP DepreciationDeferred gain on intercompany saleDepreciation expenseDepreciation of AAP assetCommon stockAPICRetained earningsBOY unamortized AAPDividends CashProperty, pant equipmentAccumulated depreciationCustomer listGoodwillGain on sale of equipmentLoss on sale of equipmentEquity investmentNet income of subsidiaryAAP DepreciationDeferred gain on intercompany saleDepreciation expenseDepreciation of AAP assetCommon stockAPICRetained earningsBOY unamortized AAPDividends Igain Equity Investment CashProperty, pant equipmentAccumulated depreciationCustomer listGoodwillGain on sale of equipmentLoss on sale of equipmentEquity investmentNet income of subsidiaryAAP DepreciationDeferred gain on intercompany saleDepreciation expenseDepreciation of AAP assetCommon stockAPICRetained earningsBOY unamortized AAPDividends CashProperty, pant equipmentAccumulated depreciationCustomer listGoodwillGain on sale of equipmentLoss on sale of equipmentEquity investmentNet income of subsidiaryAAP DepreciationDeferred gain on intercompany saleDepreciation expenseDepreciation of AAP assetCommon stockAPICRetained earningsBOY unamortized AAPDividends Idepr CashProperty, pant equipmentAccumulated depreciationCustomer listGoodwillGain on sale of equipmentLoss on sale of equipmentEquity investmentNet income of subsidiaryAAP DepreciationDeferred gain on intercompany saleDepreciation expenseDepreciation of AAP assetCommon stockAPICRetained earningsBOY unamortized AAPDividends CashProperty, pant equipmentAccumulated depreciationCustomer listGoodwillGain on sale of equipmentLoss on sale of equipmentEquity investmentNet income of subsidiaryAAP DepreciationDeferred gain on intercompany saleDepreciation expenseDepreciation of AAP assetCommon stockAPICRetained earningsBOY unamortized AAPDividends

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Prepare consolidation spreadsheet for intercompany sale of equipment - Equity method Assume a parent company acquired its subsidiary on January 1, 2009, at a purchase

Prepare consolidation spreadsheet for intercompany sale of equipment - Equity method Assume a parent company acquired its subsidiary on January 1, 2009, at a purchase price that was $310,000 in excess of the book value of the subsidiary's Stockholders' Equity on the acquisition date. Of that excess, $210,000 was assigned to a Customer List that is being amortized over a 10-year period. The remaining $100,000 was assigned to Goodwill.

In January of 2012, the wholly owned subsidiary sold Equipment to the parent for a cash price of $122,500. The subsidiary had acquired the equipment at a cost of $140,000 and depreciated the equipment over its 10- year useful life using the straight-line method (no salvage value). The subsidiary had depreciated the equipment for 4 years at the time of sale. The parent retained the depreciation policy of the subsidiary and depreciated the equipment over its remaining 6-year useful life.

Financial statements of the parent and its subsidiary for the year ended December 31, 2013 follow in part f. below. The parent uses the equity method to account for its Equity Investment. The Customer List was amortized as part of the parent's equity method accounting.

a. Prepare the journal entry that the subsidiary made to record the sale of the equipment to the parent, the journal entry that the parent made to record the purchase, and the [I] entries for the year of sale.

Note: Round answers to the nearest whole number.

Journal Entries
	Description	Debit	Credit
Subsidiary:	Cash
	CashProperty, pant & equipmentAccumulated depreciationCustomer listGoodwillGain on sale of equipmentLoss on sale of equipmentEquity investmentNet income of subsidiaryAAP DepreciationDeferred gain on intercompany saleOperating expensesDepreciation of AAP assetCommon stockAPICRetained earningsBOY unamortized AAPDividends
	CashProperty, pant & equipmentAccumulated depreciationCustomer listGoodwillGain on sale of equipmentLoss on sale of equipmentEquity investmentNet income of subsidiaryAAP DepreciationDeferred gain on intercompany saleOperating expensesDepreciation of AAP assetCommon stockAPICRetained earningsBOY unamortized AAPDividends
	Property, plant & equipment
Parent:	CashProperty, pant & equipmentAccumulated depreciationCustomer listGoodwillGain on sale of equipmentLoss on sale of equipmentEquity investmentNet income of subsidiaryAAP DepreciationDeferred gain on intercompany saleOperating expensesDepreciation of AAP assetCommon stockAPICRetained earningsBOY unamortized AAPDividends
	CashProperty, pant & equipmentAccumulated depreciationCustomer listGoodwillGain on sale of equipmentLoss on sale of equipmentEquity investmentNet income of subsidiaryAAP DepreciationDeferred gain on intercompany saleOperating expensesDepreciation of AAP assetCommon stockAPICRetained earningsBOY unamortized AAPDividends
[Igain]	CashProperty, pant & equipmentAccumulated depreciationCustomer listGoodwillGain on sale of equipmentLoss on sale of equipmentEquity investmentNet income of subsidiaryAAP DepreciationDeferred gain on intercompany saleOperating expensesDepreciation of AAP assetCommon stockAPICRetained earningsBOY unamortized AAPDividends
	Property, plant & equipment
	CashProperty, pant & equipmentAccumulated depreciationCustomer listGoodwillGain on sale of equipmentLoss on sale of equipmentEquity investmentNet income of subsidiaryAAP DepreciationDeferred gain on intercompany saleOperating expensesDepreciation of AAP assetCommon stockAPICRetained earningsBOY unamortized AAPDividends
[Idepr]	CashProperty, pant & equipmentAccumulated depreciationCustomer listGoodwillGain on sale of equipmentLoss on sale of equipmentEquity investmentNet income of subsidiaryAAP DepreciationDeferred gain on intercompany saleOperating expensesDepreciation of AAP assetCommon stockAPICRetained earningsBOY unamortized AAPDividends
	CashProperty, pant & equipmentAccumulated depreciationCustomer listGoodwillGain on sale of equipmentLoss on sale of equipmentEquity investmentNet income of subsidiaryAAP DepreciationDeferred gain on intercompany saleOperating expensesDepreciation of AAP assetCommon stockAPICRetained earningsBOY unamortized AAPDividends

b. Compute the remaining portion of the deferred gain on January 1, 2013.

Round your answer to nearest whole number. $Answer

c. Show the computation to yield the $127,417 of Income (loss) from subsidiary reported by the parent for the year ended December 31, 2013.

Note: Use a negative sign with an answer to indicate a reduction in the computation.

Net income of subsidiary
AAP Depreciation
CashPPE, netAccumulated depreciationCustomer listGoodwillGain on sale of equipmentLoss on sale of equipmentEquity investmentNet income of subsidiaryAAP DepreciationDeferred gain on intercompany saleOperating expensesDepreciation of AAP assetCommon stockAPICRetained earningsBOY unamortized AAPDividends
Equity income

d. Compute the Equity Investment balance of $805,334 on December 31, 2013.

Note: Use a negative sign with an answer to indicate a reduction in the computation.

Common stock
APIC
EOY Retained earnings
EOY Unamortized AAP
Gain on intercompany sale
Equity investment

e. Prepare the consolidation entries for the year ended December 31, 2013.

Consolidation Worksheet
	Description	Debit	Credit
[C]	CashProperty, pant & equipmentAccumulated depreciationCustomer listGoodwillGain on sale of equipmentLoss on sale of equipmentEquity investmentNet income of subsidiaryAAP DepreciationDeferred gain on intercompany saleDepreciation expenseDepreciation of AAP assetIncome (loss) from subsidiaryCommon stockAPICRetained earningsBOY unamortized AAPDividends
	Dividends
	CashProperty, pant & equipmentAccumulated depreciationCustomer listGoodwillGain on sale of equipmentLoss on sale of equipmentEquity investmentNet income of subsidiaryAAP DepreciationDeferred gain on intercompany saleDepreciation expenseDepreciation of AAP assetCommon stockAPICRetained earningsBOY unamortized AAPDividends
[E]	CashProperty, pant & equipmentAccumulated depreciationCustomer listGoodwillGain on sale of equipmentLoss on sale of equipmentEquity investmentNet income of subsidiaryAAP DepreciationDeferred gain on intercompany saleDepreciation expenseDepreciation of AAP assetCommon stockAPICRetained earningsBOY unamortized AAPDividends
	APIC
	Retained earnings
	CashProperty, pant & equipmentAccumulated depreciationCustomer listGoodwillGain on sale of equipmentLoss on sale of equipmentEquity investmentNet income of subsidiaryAAP DepreciationDeferred gain on intercompany saleDepreciation expenseDepreciation of AAP assetCommon stockAPICRetained earningsBOY unamortized AAPDividends
[A]	Customer list
	CashProperty, pant & equipmentAccumulated depreciationCustomer listGoodwillGain on sale of equipmentLoss on sale of equipmentEquity investmentNet income of subsidiaryAAP DepreciationDeferred gain on intercompany saleDepreciation expenseDepreciation of AAP assetCommon stockAPICRetained earningsBOY unamortized AAPDividends
	CashProperty, pant & equipmenttAccumulated depreciationCustomer listGoodwillGain on sale of equipmentLoss on sale of equipmentEquity investmentNet income of subsidiaryAAP DepreciationDeferred gain on intercompany saleDepreciation expenseDepreciation of AAP assetCommon stockAPICRetained earningsBOY unamortized AAPDividends
[D]	CashProperty, pant & equipmentAccumulated depreciationCustomer listGoodwillGain on sale of equipmentLoss on sale of equipmentEquity investmentNet income of subsidiaryAAP DepreciationDeferred gain on intercompany saleDepreciation expenseDepreciation of AAP assetCommon stockAPICRetained earningsBOY unamortized AAPDividends
	CashProperty, pant & equipmentAccumulated depreciationCustomer listGoodwillGain on sale of equipmentLoss on sale of equipmentEquity investmentNet income of subsidiaryAAP DepreciationDeferred gain on intercompany saleDepreciation expenseDepreciation of AAP assetCommon stockAPICRetained earningsBOY unamortized AAPDividends
[Igain]	Equity Investment
	CashProperty, pant & equipmentAccumulated depreciationCustomer listGoodwillGain on sale of equipmentLoss on sale of equipmentEquity investmentNet income of subsidiaryAAP DepreciationDeferred gain on intercompany saleDepreciation expenseDepreciation of AAP assetCommon stockAPICRetained earningsBOY unamortized AAPDividends
	CashProperty, pant & equipmentAccumulated depreciationCustomer listGoodwillGain on sale of equipmentLoss on sale of equipmentEquity investmentNet income of subsidiaryAAP DepreciationDeferred gain on intercompany saleDepreciation expenseDepreciation of AAP assetCommon stockAPICRetained earningsBOY unamortized AAPDividends
[Idepr]	CashProperty, pant & equipmentAccumulated depreciationCustomer listGoodwillGain on sale of equipmentLoss on sale of equipmentEquity investmentNet income of subsidiaryAAP DepreciationDeferred gain on intercompany saleDepreciation expenseDepreciation of AAP assetCommon stockAPICRetained earningsBOY unamortized AAPDividends
	CashProperty, pant & equipmentAccumulated depreciationCustomer listGoodwillGain on sale of equipmentLoss on sale of equipmentEquity investmentNet income of subsidiaryAAP DepreciationDeferred gain on intercompany saleDepreciation expenseDepreciation of AAP assetCommon stockAPICRetained earningsBOY unamortized AAPDividends