Question
Prepare consolidation spreadsheet for intercompany sale of equipment - Equity method Assume that a parent company acquired its subsidiary on January 1, 2013, at a
Prepare consolidation spreadsheet for intercompany sale of equipment - Equity method Assume that a parent company acquired its subsidiary on January 1, 2013, at a purchase price that was $600,000 in excess of the book value of the subsidiarys Stockholders Equity on the acquisition date. Of that excess, $100,000 was assigned to a patent, and $200,000 to an unrecorded Customer List ownedby the subsidiary. The patent asset is being depreciated over its 10-year legal life and the Customer List is being amortized over a 5-year period. Amortization is computed on a straight-line basis with no salvage value. The remaining $300,000 of the purchase price was assigned to Goodwill.
In January of 2015, the parent sold equipment to its wholly owned subsidiary for a cash price of $150,000. The subsidiary 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 value). The subsidiary had depreciated the equipment for 5 years at the time of sale. The parent retained the depreciation policy of the subsidiary and depreciated the equipment over its remaining 5-year useful life.
Following are the financial statements of the parent and its subsidiary for the year ended December 31, 2016 The parent usues the equity method to account for its Equity Investmnt. The Customer List and Patent assets wre 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.
b. Compute the remaining portion of the deferred gain on January 1, 2016. Round to nearest whole number. Use negative signs with answers when appropriate.
c. Show the computation to yield the $319,220 of Income (loss) from subsidiary reported by the parent for the year ended December 31, 2016. Hint: Use negative signs with answers when appropriate.
d. Compute the Equity Investment balance of $1,952,452 on December 31, 2016. Hint: Use negative signs with answers when appropriate.
e. Prepare the consolidation entries for the year ended December 31, 2016.
f. Prepare the consolidation spreadsheet for the year ended December 31, 2016. Hint: Use negative signs with answers when appropriate.
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