Pushdown Accounting Assume a parent company acquires its subsidiary by paying $1,200,000 for all of the outstanding voting shares of the investee. On the acquisition date, subsidiary's assets and liabilities have individual fair values that equal their book values, except for property equipment with a fair value greater than book value by $150,000 and license with a fair value greater than book value by $250,000. The parent and subsidiary have the following balance sheets immediately after the acquisition, but before any pushdown adjustments by the subsidiary: Parent Subsidiary Assets: Cash & receivables Inventory Property & equipment, net Equity investment $ 800,000 $100,000 600,000 200,000 2,300,000 775,000 1,200,000 Licenses 25,000 $4,900,000 $1,100,000 Liabilities and stockholders' equity: Current liabilities $400,000 $150,000 Other liabilities 300,000 Note payable 350,000 Common stock APIC Retained earnings 1,670,000 100,000 1,430,000 200,000 1,100,000 $4,900,000 300,000 $1,100,000 a. Compute the amount of goodwill implicit in the acquisition of the subsidiary. $ b. Assume the subsidiary elects to apply pushdown accounting immediately after the above financial statements were prepared. Provide the journal entries required for the subsidiary to apply pushdown accounting. Description Property & equipment, net Licenses Debit Credit c. Prepare the consolidation entry or entries on the date of acquisition, assuming the subsidiary applied pushdown accounting. Debit Description [E] Common stock Credit APIC d. Prepare the consolidated balance sheet on the date of acquisition. Consolidated Balance Sheet Assets: Cash & receivables Inventory Property & equipment, net Licenses $ Liabilities and stockholders' equity: Current liabilities Other liabilities Note payable Common stock APIC Retained earnings $