Problem 3 Parent acquired 64,000 shares of Sub stock on the date of acquisition Sub had the following Stockholders Equity January 1, 2016 at a price of $42 per share. At Common Stock ($5 par) Paid in Capital Retained Earnings 400,000 760,000 1,040,000 At the date of acquisition, the sub had the following differences between book and fair values Book Fair Value Value Inventory Land 695,000 400,000 515,000 812,000 550,000 686,000 (8 Yr Remaining Life) Equipment, net On 1/1/17 the sub loaned the parent $300,000 at an 8% interest rate REQUIRED: Complete the attached consolidation workpapers for the year ended December 31, 2018 Parent and Subsidiary Consolidated Income Statement December 31, 2018 Parent Sub Elimination Consolidated Revenues Sales 6,750,000 2,246,000 Income from Sub 96,000 75,000 0 Interest Income 24,000 Total Revenue 6,921,000 2,270,000 0 Expenses Cost of Goods Sold 4,123,000 1,454,000 Operating Expenses 1,057,000 510,000 Interest Expense 24,000 Minority Interest 0 Total Expenses 5,204,000 1,964,000 0 Net Income 1,717,000 306,000 0 Parent and Subsidiary Consolidated Statement Retained Earnings December 31, 2018 Parent Sub Elimination Consolidated Retained Earnings, beginning of year 3,267,000 1,423,000 Net Income 1,717,000 306,000 4,984,000 1,729,000 Dividends 450,000 120,000 Retained Earnings, end of year 4,534,000 1,609,000 Parent and Subsidiary Consolidated Balance Sheet December 31, 2018 Parent Sub Elimination Consolidated ASSETS Cash 545,000 362,000 310,000 765,000 Accounts Receivable 1,156,000 Inventory Dividend Receivable Intercompany Loan Receivable Land 1,081,000 24,000 0 300,000 350,000 400,000 Building, net Equipment, net Investment in Subsidiary Goodwill 1,124,000 595,000 423,000 1,087,000 2,688,000 0 0 0 Total Assets 8,055,000 3,155,000 0 LIABILITIES AND EQUITY Accounts Payable Dividends Payable Intercompany loan payable Other Liabilities Common Stock ($5 Par) Paid in Capital Retained Earnings Minority Interest 865,000 324,000 0 30,000 300,000 0 456,000 32,000 1,000,000 900,000 4,534,000 400,000 760,000 1,609,000 0 0 8,055,000 3,155,000 0 Problem 3 Parent acquired 64,000 shares of Sub stock on the date of acquisition Sub had the following Stockholders Equity January 1, 2016 at a price of $42 per share. At Common Stock ($5 par) Paid in Capital Retained Earnings 400,000 760,000 1,040,000 At the date of acquisition, the sub had the following differences between book and fair values Book Fair Value Value Inventory Land 695,000 400,000 515,000 812,000 550,000 686,000 (8 Yr Remaining Life) Equipment, net On 1/1/17 the sub loaned the parent $300,000 at an 8% interest rate REQUIRED: Complete the attached consolidation workpapers for the year ended December 31, 2018 Parent and Subsidiary Consolidated Income Statement December 31, 2018 Parent Sub Elimination Consolidated Revenues Sales 6,750,000 2,246,000 Income from Sub 96,000 75,000 0 Interest Income 24,000 Total Revenue 6,921,000 2,270,000 0 Expenses Cost of Goods Sold 4,123,000 1,454,000 Operating Expenses 1,057,000 510,000 Interest Expense 24,000 Minority Interest 0 Total Expenses 5,204,000 1,964,000 0 Net Income 1,717,000 306,000 0 Parent and Subsidiary Consolidated Statement Retained Earnings December 31, 2018 Parent Sub Elimination Consolidated Retained Earnings, beginning of year 3,267,000 1,423,000 Net Income 1,717,000 306,000 4,984,000 1,729,000 Dividends 450,000 120,000 Retained Earnings, end of year 4,534,000 1,609,000 Parent and Subsidiary Consolidated Balance Sheet December 31, 2018 Parent Sub Elimination Consolidated ASSETS Cash 545,000 362,000 310,000 765,000 Accounts Receivable 1,156,000 Inventory Dividend Receivable Intercompany Loan Receivable Land 1,081,000 24,000 0 300,000 350,000 400,000 Building, net Equipment, net Investment in Subsidiary Goodwill 1,124,000 595,000 423,000 1,087,000 2,688,000 0 0 0 Total Assets 8,055,000 3,155,000 0 LIABILITIES AND EQUITY Accounts Payable Dividends Payable Intercompany loan payable Other Liabilities Common Stock ($5 Par) Paid in Capital Retained Earnings Minority Interest 865,000 324,000 0 30,000 300,000 0 456,000 32,000 1,000,000 900,000 4,534,000 400,000 760,000 1,609,000 0 0 8,055,000 3,155,000 0