Problem II. On January 1, 2017, Parent Co. acquired 80% of Sub Inc. by paying $800,000. Non-controlling interest was valued at $200,000. Sub reported common stock on that date of $520,000 with retained earnings of $352,000. A building was undervalued in the company's financial records by $18,000. This building had a ten-year (10) remaining useful life. Copyrights of $80,000 were not recognized in the subsidiary's records and should be amortized over 20 years. Sub earned net income and paid cash dividends as follows over the years: Net Income Dividends Paid 2017 115,000 64,600 2018 144,400 71,600 2019 164,000 94,000 Instructions: 1. Prepare the allocation of the acquisition on January 1, 2017. In your presentation, but sure to show the excess fair value over cost allocated to the identifiable assets, and any resulting goodwill. In addition, for the identifiable assets, be sure to calculate the annual amortization of excess fair value over book value. Problem II. Continued. 2. Prepare journal entries that Parent is required to record associated with the investment under the Equity Method in 2019. Problem II. Continued. 3. Prepare the Consolidation Worksheet Entries at December 31, 2019: Consolidation Worksheet Entry S(note: Calculate Retained Earnings from 1/1/16 to 12/31/17 to derive Retained Earnings-S (1/1/19)): Consolidation Worksheet Entry A: Consolidation Worksheet Entry I: Consolidation Worksheet Entry D: Consolidation Worksheet Entry E: Problem II. Continued. 4. Using this partial spreadsheet below, post the relevant Consolidation Worksheet Entries from Question 3 above. Then, calculate for the period ended December 31, 2019 on the worksheet: (a) consolidated net income (b) non-controlling interest in Sub's net income (show your calculation separately) (c) net income to controlling interest. NCI Consolidation Entries Debit Credit Consolidated Debit Parent Sub Accounts Income Statement Revenues Cost of goods sold Depreciation Expense Amortization Expense Equity in Sub's earnings Separate Net Income Consolidated Net Income Non-Controlling Income Controlling Interest Income (810,000) 344,000 60,000 170,000 (126,560) (362,560) (504,000) 200,000 20,000 120,000 (164,000) Show your calculation of the Non-controlling Income of the Subsidiary below: Problem II. On January 1, 2017, Parent Co. acquired 80% of Sub Inc. by paying $800,000. Non-controlling interest was valued at $200,000. Sub reported common stock on that date of $520,000 with retained earnings of $352,000. A building was undervalued in the company's financial records by $18,000. This building had a ten-year (10) remaining useful life. Copyrights of $80,000 were not recognized in the subsidiary's records and should be amortized over 20 years. Sub earned net income and paid cash dividends as follows over the years: Net Income Dividends Paid 2017 115,000 64,600 2018 144,400 71,600 2019 164,000 94,000 Instructions: 1. Prepare the allocation of the acquisition on January 1, 2017. In your presentation, but sure to show the excess fair value over cost allocated to the identifiable assets, and any resulting goodwill. In addition, for the identifiable assets, be sure to calculate the annual amortization of excess fair value over book value. Problem II. Continued. 2. Prepare journal entries that Parent is required to record associated with the investment under the Equity Method in 2019. Problem II. Continued. 3. Prepare the Consolidation Worksheet Entries at December 31, 2019: Consolidation Worksheet Entry S(note: Calculate Retained Earnings from 1/1/16 to 12/31/17 to derive Retained Earnings-S (1/1/19)): Consolidation Worksheet Entry A: Consolidation Worksheet Entry I: Consolidation Worksheet Entry D: Consolidation Worksheet Entry E: Problem II. Continued. 4. Using this partial spreadsheet below, post the relevant Consolidation Worksheet Entries from Question 3 above. Then, calculate for the period ended December 31, 2019 on the worksheet: (a) consolidated net income (b) non-controlling interest in Sub's net income (show your calculation separately) (c) net income to controlling interest. NCI Consolidation Entries Debit Credit Consolidated Debit Parent Sub Accounts Income Statement Revenues Cost of goods sold Depreciation Expense Amortization Expense Equity in Sub's earnings Separate Net Income Consolidated Net Income Non-Controlling Income Controlling Interest Income (810,000) 344,000 60,000 170,000 (126,560) (362,560) (504,000) 200,000 20,000 120,000 (164,000) Show your calculation of the Non-controlling Income of the Subsidiary below