Prepare consolidation spreadsheet for intercompany sale of land - Equity method Assume that a parent company acquired its subsidiary on January 1, 2014, at a purchase price that was $300,000 in excess of the book value of the subsidiary's Stockholders' Equity on the acquisition date. Of that excess, $200,000 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 2015, the wholly owned subsidiary sold Land to the parent for $100,000. 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, 2016 are presented in d. below: a. Show the computation to yield the $32,500 of Income (loss) from subsidiary reported by the parent for the year ended December 31, 2016. Hint: Use negative signs with answers when appropriate. Net income of subsidiary 0 Income (loss) from subsidiary b. Show the computation to yield the $505,675 Equity Investment account balance reported by the parent on December 31, 2016. Hint: Use negative signs with answers when appropriate. Common stock APIC 0 BOY Retained earnings 0 BOY Unamortized AAP Gain on intercompany sale of land 0 Income (loss) from subsidiary 0 Dividends Equity investment Prepare the consolidation entries for the year ended December 31, 2016 C. Consolidation Worksheet Credit Debit Description 0 0 [C] 0 0 Dividends 0 0 0 0 Common stock [E] 0 0 APIC 0 0 0 0 0 Patent [A] 0 0 0 0 0 [D] 0 0 [gain] 0 0 o 41 d. Prepare the consolidation spreadsheet for the year ended December 31, 2016. Hint: Use negative signs with answers when appropriate. Elimination Entries Parent Sub Dr Cr Income statement: $3,000,000 Sales $375,000 Cost of goods (225,000) (2,100,000) sold Gross profit 900,000 150,000 Income (loss) from subsidiary 32,500 0 Operating (570,000) (97,500) 0 expenses $362,500 $52,500 Net income Statement of retained earnings: BOY retained $1,477,200 $193,750 earnings 362,500 52,500 Net income (83,375) (6,825) Dividends 0 EOY retained $1,756,325 $239,425 earnings Balance sheet Assets Cash $341,566 $121,211 Balance sheet: Assets $121,211 Cash $341,566 Accounts 87,000 384,000 receivable Inventory 582,000 111,750 PPE, net 2,799,600 206,750 Patent 0 Goodwill 0 Equity 505,675 0 0 investment 0 0 Liabilities and stockholders equity Accounts $224,700 $44,760 payable Other 276,816 61,276 current liabilities Long-term liabilities 1,500,000 125,000 490,500 Common stock 25,000 0 APIC 364,500 31,250 Retained 239,425 1,756,325 earnings $4,612,841 $526,711