Prepare consolidation spreadsheet for intercompany sale of equipment - Equity method Assume a parent company acquired its subsidiary on January 1, 2015, at a purchase price that was $222,000 in excess of the book value of the subsidiary's Stockholders' Equity on the acquisition date. Of that excess, $132,000 was assigned to a Customer List that is being amortized over a 10-year period. The remaining $90,000 was assigned to Goodwill. In January of 2018, the wholly owned subsidiary sold Equipment to the parent for a cash price of $72,000. The subsidiary had acquired the equipment at a cost of $84,000 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, 2019 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 [l] entries for the year of sale. Journal Entries Description Debit Credit Subsidiary: Cash 0 0 0 0 0 0 Property, plant & equipment 0 0 Parent: 0 0 0 0 [lgain) 0 0 Property, plant & equipment 0 0 0 0 [ldepr) 0 0 0 0 b. Compute the remaining portion of the deferred gain on January 1, 2019. $ 0 C. Show the computation to yield the $74,400 of Income (loss) from subsidiary reported by the parent for the year ended December 31, 2019. Note: Use a negative sign with an answer to indicate a reduction in the computation. Net income of subsidiary AAP Depreciation 0 0 0 Income (loss) from subsidiary 0 d. Compute the Equity Investment balance of $540,000 on December 31, 2019. Note: Use a negative sign with an answer to indicate a reduction in the computation. Common stock 0 APIC EOY Retained earnings 0 EOY Unamortized AAP Gain on intercompany sale Equity investment 0 0 olo e. Prepare the consolidation entries for the year ended December 31, 2019. Consolidation Worksheet Description Debit Credit [C] 0 0 Dividends 0 0 0 0 [E] 0 0 0 0 APIC Retained earnings 0 0 . 0 0 [A] Customer list 0 0 0 0 0 0 [D] Operating expenses 0 0 0 0 [lgain] Equity Investment 0 0 0 0 . 0 0 [ldepr) 0 0 0 0 f. Prepare the consolidation spreadsheet for the year ended December 31, 2019. Use negative signs with answers in the Consolidated column for Cost of goods sold, Operating expenses and Dividends. Elimination Entries Dr Cr Parent Sub Consolidated S $720,000 (420,000) 300,000 S $4,800,000 (3,480,000) 1,320,000 74.400 (1.094.400) $300,000 O ooool [C] 0 D] 0 0 [deprl (216,000) $84.000 S $2.268,000 [E] 0 s 0 Income statement: Sales Cost of goods sold Gross profit Income (loss) from subsidiary Operating expenses Net income Statement of retained earnings: BOY retained earnings Net income Dividends EOY retained earnings Balance sheet: Assets Cash Accounts receivable Inventory PPE.net $168,000 84.000 0 300,000 (168.000) $2,400,000 0 [C] 0 (12,000) $240,000 S 0 $330.000 s 420.000 780,000 3,030,000 O O O O 0 Ogaini $192,000 258,000 330,000 618,000 [gain] [ldepr] [A] [A] Ilgain) Customer List O O O O O 0 [D] 0 Goodwill 0 Equity investment 540,000 0 0 [C] 0 (E) 0 [A] $5,100,000 $1,398,000 S 0 S Liabilities and stockholders' equity Accounts payable Other currentliabilities Long-term liabilities Common stock APIC Retained earnings $390,000 $99,600 480,000 120.000 900,000 780,000 330,000 68,400 600.000 90,000 2.400.000 240,000 $5,100,000 $1,398,000 0 [E] [E] 0 0 0 0 0 0 0 0 S Os 0 S Prepare consolidation spreadsheet for intercompany sale of equipment - Equity method Assume a parent company acquired its subsidiary on January 1, 2015, at a purchase price that was $222,000 in excess of the book value of the subsidiary's Stockholders' Equity on the acquisition date. Of that excess, $132,000 was assigned to a Customer List that is being amortized over a 10-year period. The remaining $90,000 was assigned to Goodwill. In January of 2018, the wholly owned subsidiary sold Equipment to the parent for a cash price of $72,000. The subsidiary had acquired the equipment at a cost of $84,000 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, 2019 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 [l] entries for the year of sale. Journal Entries Description Debit Credit Subsidiary: Cash 0 0 0 0 0 0 Property, plant & equipment 0 0 Parent: 0 0 0 0 [lgain) 0 0 Property, plant & equipment 0 0 0 0 [ldepr) 0 0 0 0 b. Compute the remaining portion of the deferred gain on January 1, 2019. $ 0 C. Show the computation to yield the $74,400 of Income (loss) from subsidiary reported by the parent for the year ended December 31, 2019. Note: Use a negative sign with an answer to indicate a reduction in the computation. Net income of subsidiary AAP Depreciation 0 0 0 Income (loss) from subsidiary 0 d. Compute the Equity Investment balance of $540,000 on December 31, 2019. Note: Use a negative sign with an answer to indicate a reduction in the computation. Common stock 0 APIC EOY Retained earnings 0 EOY Unamortized AAP Gain on intercompany sale Equity investment 0 0 olo e. Prepare the consolidation entries for the year ended December 31, 2019. Consolidation Worksheet Description Debit Credit [C] 0 0 Dividends 0 0 0 0 [E] 0 0 0 0 APIC Retained earnings 0 0 . 0 0 [A] Customer list 0 0 0 0 0 0 [D] Operating expenses 0 0 0 0 [lgain] Equity Investment 0 0 0 0 . 0 0 [ldepr) 0 0 0 0 f. Prepare the consolidation spreadsheet for the year ended December 31, 2019. Use negative signs with answers in the Consolidated column for Cost of goods sold, Operating expenses and Dividends. Elimination Entries Dr Cr Parent Sub Consolidated S $720,000 (420,000) 300,000 S $4,800,000 (3,480,000) 1,320,000 74.400 (1.094.400) $300,000 O ooool [C] 0 D] 0 0 [deprl (216,000) $84.000 S $2.268,000 [E] 0 s 0 Income statement: Sales Cost of goods sold Gross profit Income (loss) from subsidiary Operating expenses Net income Statement of retained earnings: BOY retained earnings Net income Dividends EOY retained earnings Balance sheet: Assets Cash Accounts receivable Inventory PPE.net $168,000 84.000 0 300,000 (168.000) $2,400,000 0 [C] 0 (12,000) $240,000 S 0 $330.000 s 420.000 780,000 3,030,000 O O O O 0 Ogaini $192,000 258,000 330,000 618,000 [gain] [ldepr] [A] [A] Ilgain) Customer List O O O O O 0 [D] 0 Goodwill 0 Equity investment 540,000 0 0 [C] 0 (E) 0 [A] $5,100,000 $1,398,000 S 0 S Liabilities and stockholders' equity Accounts payable Other currentliabilities Long-term liabilities Common stock APIC Retained earnings $390,000 $99,600 480,000 120.000 900,000 780,000 330,000 68,400 600.000 90,000 2.400.000 240,000 $5,100,000 $1,398,000 0 [E] [E] 0 0 0 0 0 0 0 0 S Os 0 S