Prepare consolidation spreadsheet for intercompany sale of land - Equity method Assume that a parent company acquired its subsidiary on January 1, 2011, 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 an unrecorded Patent owned by the subsidiary that is being amortized over a 10-year period. The [A] Patent asset has been amortized as part of the parent's equity method accounting. The remaining $100,000 was assigned to Goodwill. In 2012, the wholly owned subsidiary sold Land to the parent for $90,000. The Land was reported on the subsidiary's balance sheet for $70,000 on the date of sale. The parent uses the equity method to account for its Equity Investment. Financial statements of the parent and its subsidiary for the year ended December 31, 2013 are presented in d. below: a. Show the computation to yield the $34,500 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 Answer Answer Answer Answer Answer b. Show the computation to yield the $533,675 Equity Investment account balance reported by the parent on December 31, 2013. Note: Use a negative sign with an answer to indicate a reduction in the computation. Common stock Answer APIC Answer EOY Retained earnings Answer EOY Unamortized AAP Answer Gain on intercompany sale Answer Equity investment Answer c. Prepare the consolidation entries for the year ended December 31, 2013. Consolidation Worksheet Description Debit Credit [C] Answer Answer Answer Dividends Answer Answer Answer Answer Answer [E] Common stock Answer Answer APIC Answer Answer Answer Answer Answer Answer Answer Answer [A] Patent Answer Answer Answer Answer Answer Answer Answer Answer [D] Answer Answer Answer Answer Answer Answer [Igain] Answer Answer Answer Answer Answer Answer d. 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 $3,000,000 $379,000 Answer Cost of goods sold (2,100,000) (225,000) Answer Gross profit 900,000 154,000 Answer Income (loss) from subsidiary 34,500 [C] Answer Answer Operating expenses (570,000) (97,500) [D] Answer Answer Net income $364,500 $56,500 Answer Statement of retained earnings: BOY retained earnings $1,477,200 $193,750 [E] Answer Answer Net income 364,500 56,500 Answer Dividends (85,375) (6,825) Answer [C] Answer EOY retained earnings $1,756,325 $243,425 Answer Balance sheet: Assets Cash $341,566 $125,211 Answer Accounts receivable 384,000 87,000 Answer Inventory 582,000 111,750 Answer PPE, net 2,799,600 206,750 Answer [Igain] Answer Patent [A] Answer Answer [D] Answer Goodwill [A] Answer Answer Equity investment 533,675 [Igain] Answer Answer [C] Answer Answer [E] Answer [A] $4,640,841 $530,711 Answer Liabilities and stockholders' equity Accounts payable $224,700 $44,760 Answer Other currentliabilities 276,816 61,276 Answer Long-term liabilities 1,500,000 125,000 Answer Common stock 490,500 25,000 [E] Answer Answer APIC 392,500 31,250 [E] Answer Answer Retained earnings 1,756,325 243,425 Answer $4,640,841 $530,711 Answer Answer Answer