Prepare consolidation spreadsheet for intercompany sale of equipmentCost method Assume that a parent company acquired a subsidiary on January 1, 2012 for $847,000. The purchase price was $314,000 in excess of the book value of the subsidiarys Stockholders Equity on the acquisition date. On the acquisition date, the subsidiarys stockholders equity was comprised of $390,000 of no-par common stock and $143,000 of retained earnings. The Acquisition Accounting Premium (AAP) was assigned as follows: an increase of $18,000 in accounts receivable that were entirely collected during the year after acquisition, an increase of $65,000 for property, plant and equipment that has 10 years of remaining useful life, $109,000 for an unrecorded patent with an 8-year remaining life and $122,000 for goodwill. All amortizable components of the AAP are amortized using the straight-line method.

On January 1, 2014, the parent sold Equipment to the subsidiary for a cash price of $133,200. The parent had acquired the equipment at a cost of $129,300 and depreciated the equipment over its 12-year useful life using the straight-line method (no salvage value). The parent had depreciated the equipment for 2 years at the time of sale. The subsidiary retained the depreciation policy of the parent and depreciates the equipment over its remaining 10-year useful life.

Following are financial statements of the parent and its subsidiary as of December 31, 2016. The parent uses the cost method of pre-consolidation investment bookkeeping.Just e and f. Thanks!

Following are financial statements of the parent and its subsidiary as of December 31, 2016. The parent uses the cost method of pre-consolidation investment bookkeeping. Parent Subsidiary Parent Subsidiary Income statement Balance sheet Sales $1,300,000 $598,000 Assets Cost of goods sold (715,000) (364,000) Cash $117,000 $78,000 Gross profit 585,000 234,000 Accounts receivable 156,000 117,000 Deprec. & amort. Expense (39,000) (26,000) Inventory 364,000 182,000 Operating expenses (390,000) (104,000) Equity investment 847,000 Interest expense (19,500) (6,500) Property, plant & equipment 442,000 312,000 Total expenses (448,500) (136,500) Other assets 169,000 286,000 Income (loss) from subsidiary 45,500 Total assets 2,095,000 $975,000 Net income $182,000 $97,500 Liabilities and stockholders' equity Accounts payable $325,000 $70,200 Statement of retained earnings Accrued liabilities 32,500 59,800 BOY retained earnings $715,000 $325,000 Notes payable 195,000 78,000 Net income 182,000 97,500 Common stock 795,000 390,000 Dividends (149,500) (45,500) Retained earnings 747,500 377,000 Ending retained earnings $747,500 $377,000 Total liabilities and equity 2,095,000 $975,000 e. Prepare the consolidation entries for the year ended December 31, 2016. Debit Credit 161,875 0 0 161,875 45,500 0 Consolidation Journal Description [AD]] Equity investment BOY Retained earnings-Parent [C] Income (loss) from subsidiary Dividends [E] BOY Common stock (Subsidiary) BOY Retained earnings-Subsidiary Equity investment [A] PPE, net Patent 0 45,500 0 390,000 325,000 0 0 715,000 0 0 0 0 Goodwill 122,000 0 0 0 [D] Equity investment Deprec. & amort. expense PPE, net 20,125 0 0 6,500 13,625 Patent 0 25,450 0 - 0 25,450 [lgain] Equity investment PPE, net [ldep] PPE, net Deprec. & amort. expense > 21,550 0 0 21,550 325,000 f. Prepare the consolidation spreadsheet for the year ended December 31, 2016. Use negative signs with your answers in the Consolidated column for: Cost of goods sold, all expenses (inc. Total expenses) and Dividends. Consolidation Worksheet Parent Subsidiary Debit Credit Consolidated Income statement Sales $1,300,000 $598,000 $ 0 Cost of goods sold (715,000) (364,000) 0 Gross profit 585,000 234,000 0 Deprec. & amort. expense (39,000) (26,000) [D] 20,125 O [Idep] 0 Operating expenses (390,000) (104,000) 0 Interest expense (19,500) (6,500) 0 Total Expenses (448,500) (136,500) 0 Income (loss) from subsidiary 45,500 [C] 45,500 0 Net income $182,000 $97,500 $ 0 Retained earnings statement: BOY retained earnings $715,000 $325,000 [E] 161,875 [AD]] $ 0 Net income 182,000 97,500 0 Dividends (149,500) (45,500) 45,500 (C) 0 Ending retained earnings $747,500 $377,000 $ 0 Balance sheet: Assets Cash $117,000 $78,000 $ 195,000 Accounts receivable 156,000 117,000 273,000 Inventory 364,000 182,000 546,000 Equity investment 847,000 [AD] 161,875 0 [E] 0 [lgain] 0 0 [A] PPE, net 442,000 312,000 [A] 0 6,500 [D] 0 [ldep] 0 O [lgain] Other assets 169,000 286,000 455,000 Patent [A] 0 13,625 [D] 0 Goodwill [A] 122,000 0 Total assets 2,095,000 $975,000 $ 0 Liabilities & stockholders' equity Accounts payable $325,000 $70,200 $ 395,200 Accrued liabilities 32,500 59,800 92,300 Notes payable 195,000 78,000 273,000 Common stock 795,000 390,000 [E] 390,000 795,000 EOY Retained earnings 747,500 377,000 0 Total liabilities and equity $2,095,000 $975,000 $ 0 $ 0 0