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 $320,000 in excess of the book value of the subsidiary's Stockholders' Equity on the acquisition date. Of that excess, $220,000 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 $116,500. 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 Subsidiary: Cash Accumulated depreciation Gain on sale of equipment Property, plant & equipment Property, plant & equipment Cash Ilgain] Gain on sale of equipment Property, plant & equipment 23,500 Accumulated depreciation [idepr1 Accumulated depreciation Depreciation Expense Credit Debit 116,500 0 0 x 0 0 OX OX 0 116,500 Parent: D 116,500 OX 0 D DX 5,417 0 5,417 b. Compute the remaining portion of the deferred gain on January 1, 2013. Round your answer to nearest whole number. $ 30,667 b. Compute the remaining portion of the deferred gain on January 1, 2013. Round your answer to nearest whole number $ 30,667 X 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 144,000 AAP Depreciation OX Deferred gain an intercompany sale 16,583 x Income (loss) from subsidiary OX d. Compute the Equity Investment balance of $816,334 on December 31, 2013. Note: Use a negative sign with an answer to indicate a reduction in the computation. Common stock 124,000 APIC 155,000 EOY Retained earnings 349,000 EOY Unamortized AAP Gain on intercompany sale 100,000 X Equity investment OX e. Prepare the consolidation entries for the year ended December 31, 2013. Consolidation Worksheet Description Debit Credit (C) Income foss) from subsidiary 127.417 Dividends 20,000 0 . e. Prepare the consolidation entries for the year ended December 31, 2013. Consolidation Worksheet Description Debit Credit (C) Income (loss) from subsidiary 127,417 0 Dividends 0 20,000 Equity investment 0 107,417 [E] Common stock 124,000 0 APIC 155,000 0 Retained earnings 225,000 0 Equity investment 0 504,000 [A] Customer list Goodwill 100,000 Equity investment 0X [D] Operating expenses OX Customer list 0 OX [lgain] Equity Investment 0 x 0 Property, plant & equipment OX 0 Accumulated depreciation 0 0 X [ldepr] Accumulated depreciation OX 0 Depreciation Expense 0 0 x 0 0 > > 0 0 > . f. Prepare the consolidation spreadsheet for the year ended December 31, 2013. Use negative signs with answers in the Consolidated column for Cost of goods sold, Operating expenses and Dividends. Elimination Entries Dr Cr Income statement: Sales Cost of goods sold Parent Sub $10,000,000 $1,004,000 (7,200,000) (600,000) Consolidated $11,004,000 (7,800,000) f. Prepare the consolidation spreadsheet for the year ended December 31, 2013. Use negative signs with answers in the consolidated column for Cost of goods sold, Operating expenses and Dividends. Elimination Entries Income statement: Parent Sub Dr Cr Consolidated Sales $10,000,000 $1,004,000 $11,004,000 Cost of goods sold (7,200,000) 1600,000) (7,800,000) Gross profit 2,800,000 404,000 $ 3,204,000 Income (loss) from subsidiary 127.417 [C] 127.417 0 Operating expenses (1,500,000) 1260,000) [D] 260,000 X Oxideprl OX Net income $1,427 417 $144,000 $ OX Statement of retained earnings: BOY retained earnings $5,814,300 $225,000 [E] 225,000 $ 5,814,300 Net income 1.427.417 144,000 1,427,417 Dividends (285,200) (20,000) 20,000 ICI (285,200) EOY retained earnings $6.956,517 $349,000 $ 6,956,517 Balance sheet: Assets Cash $1,058,100 $326,000 $ 1,334,100 Accounts receivable 1,750,000 430,000 2,180,000 Inventory 2,600,000 550,000 3,150,000 PPE, net 10.060,000 1,030,000 Ilgain] OX O x Tigain! OX [Idepr] OX Customer List (A) OX O x D) OX Goodwill [A] 100,000 OX Equity investment 816,334 [lgain) 107,417 [C] 0 504,000 () OXA $16,284,434 $2,336,000 $ OX Liabilities and stockholders' equity Accounts payable $1,010,000 $178,000 $ 1,188,000 1.427,411 (285,200) 149.000 (20,000) $349,000 20,000[C] 1.427,417 (285,200) $ 6,956,517 $6,956,517 Nel comie Dividends EOY retained earnings Balance sheet: Assets Cash Accounts receivable Inventory PPE, net $1,058, 100 1,750,000 2,600,000 10,060,000 $ 1,384,100 2,180,000 3,150,000 OX 0 x 0 x Ogain $326,000 430,000 550,000 1,030,000 Ilgain! [ldepri [A] [A] [lgain] 0 X 0X [D] Ox Customer List Goodwill Equity investment 0X 100,000 OX 0 816,334 0X 107,417 [C] 504,000[E] 0X [A] $16,284,434 $2,336,000 $ Ox Liabilities and stockholders' equity Accounts payable Other currentliabilities Long-term liabilities Common stock APIC $1,010,000 $178,000 1,190,000 230,000 2,500,000 1,300,000 553,000 124,000 4,074,917 155,000 6,956,517 349,000 $16,284,434 $2,336,000 [E] 124,000 155,000 $ 1,188,000 1,420,000 3,800,000 553,000 4,074,917 6,956,517 $17.992,434 [E] Retained earnings $ 0 x $ 0 x 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 $320,000 in excess of the book value of the subsidiary's Stockholders' Equity on the acquisition date. Of that excess, $220,000 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 $116,500. 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 Subsidiary: Cash Accumulated depreciation Gain on sale of equipment Property, plant & equipment Property, plant & equipment Cash Ilgain] Gain on sale of equipment Property, plant & equipment 23,500 Accumulated depreciation [idepr1 Accumulated depreciation Depreciation Expense Credit Debit 116,500 0 0 x 0 0 OX OX 0 116,500 Parent: D 116,500 OX 0 D DX 5,417 0 5,417 b. Compute the remaining portion of the deferred gain on January 1, 2013. Round your answer to nearest whole number. $ 30,667 b. Compute the remaining portion of the deferred gain on January 1, 2013. Round your answer to nearest whole number $ 30,667 X 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 144,000 AAP Depreciation OX Deferred gain an intercompany sale 16,583 x Income (loss) from subsidiary OX d. Compute the Equity Investment balance of $816,334 on December 31, 2013. Note: Use a negative sign with an answer to indicate a reduction in the computation. Common stock 124,000 APIC 155,000 EOY Retained earnings 349,000 EOY Unamortized AAP Gain on intercompany sale 100,000 X Equity investment OX e. Prepare the consolidation entries for the year ended December 31, 2013. Consolidation Worksheet Description Debit Credit (C) Income foss) from subsidiary 127.417 Dividends 20,000 0 . e. Prepare the consolidation entries for the year ended December 31, 2013. Consolidation Worksheet Description Debit Credit (C) Income (loss) from subsidiary 127,417 0 Dividends 0 20,000 Equity investment 0 107,417 [E] Common stock 124,000 0 APIC 155,000 0 Retained earnings 225,000 0 Equity investment 0 504,000 [A] Customer list Goodwill 100,000 Equity investment 0X [D] Operating expenses OX Customer list 0 OX [lgain] Equity Investment 0 x 0 Property, plant & equipment OX 0 Accumulated depreciation 0 0 X [ldepr] Accumulated depreciation OX 0 Depreciation Expense 0 0 x 0 0 > > 0 0 > . f. Prepare the consolidation spreadsheet for the year ended December 31, 2013. Use negative signs with answers in the Consolidated column for Cost of goods sold, Operating expenses and Dividends. Elimination Entries Dr Cr Income statement: Sales Cost of goods sold Parent Sub $10,000,000 $1,004,000 (7,200,000) (600,000) Consolidated $11,004,000 (7,800,000) f. Prepare the consolidation spreadsheet for the year ended December 31, 2013. Use negative signs with answers in the consolidated column for Cost of goods sold, Operating expenses and Dividends. Elimination Entries Income statement: Parent Sub Dr Cr Consolidated Sales $10,000,000 $1,004,000 $11,004,000 Cost of goods sold (7,200,000) 1600,000) (7,800,000) Gross profit 2,800,000 404,000 $ 3,204,000 Income (loss) from subsidiary 127.417 [C] 127.417 0 Operating expenses (1,500,000) 1260,000) [D] 260,000 X Oxideprl OX Net income $1,427 417 $144,000 $ OX Statement of retained earnings: BOY retained earnings $5,814,300 $225,000 [E] 225,000 $ 5,814,300 Net income 1.427.417 144,000 1,427,417 Dividends (285,200) (20,000) 20,000 ICI (285,200) EOY retained earnings $6.956,517 $349,000 $ 6,956,517 Balance sheet: Assets Cash $1,058,100 $326,000 $ 1,334,100 Accounts receivable 1,750,000 430,000 2,180,000 Inventory 2,600,000 550,000 3,150,000 PPE, net 10.060,000 1,030,000 Ilgain] OX O x Tigain! OX [Idepr] OX Customer List (A) OX O x D) OX Goodwill [A] 100,000 OX Equity investment 816,334 [lgain) 107,417 [C] 0 504,000 () OXA $16,284,434 $2,336,000 $ OX Liabilities and stockholders' equity Accounts payable $1,010,000 $178,000 $ 1,188,000 1.427,411 (285,200) 149.000 (20,000) $349,000 20,000[C] 1.427,417 (285,200) $ 6,956,517 $6,956,517 Nel comie Dividends EOY retained earnings Balance sheet: Assets Cash Accounts receivable Inventory PPE, net $1,058, 100 1,750,000 2,600,000 10,060,000 $ 1,384,100 2,180,000 3,150,000 OX 0 x 0 x Ogain $326,000 430,000 550,000 1,030,000 Ilgain! [ldepri [A] [A] [lgain] 0 X 0X [D] Ox Customer List Goodwill Equity investment 0X 100,000 OX 0 816,334 0X 107,417 [C] 504,000[E] 0X [A] $16,284,434 $2,336,000 $ Ox Liabilities and stockholders' equity Accounts payable Other currentliabilities Long-term liabilities Common stock APIC $1,010,000 $178,000 1,190,000 230,000 2,500,000 1,300,000 553,000 124,000 4,074,917 155,000 6,956,517 349,000 $16,284,434 $2,336,000 [E] 124,000 155,000 $ 1,188,000 1,420,000 3,800,000 553,000 4,074,917 6,956,517 $17.992,434 [E] Retained earnings $ 0 x $ 0 x