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 $800,000 $ 100,000 Inventory 600,000 200,000 Property & equipment, net 2,300,000 775,000 Equity investment Licenses 1,200,000 25,000 Liabilities and stockholders' equity: $ 4,900,000 $1,100,000 Current liabilities Other liabilities Note payable Common stock APIC Retained earnings $ 400,000 $150,000 300,000 350,000 1,670,000 100,000 1,430,000 200,000 1,100,000 300,000 $ 4,900,000 $ 1,100,000 c. Prepare the consolidation entry or entries on the date of acquisition, assuming the subsidiary applied pushdown accounting. Description [E] Common stock Debit 100,000 Credit 0 APIC 200,000 0 Pushdown equity 600,000 * 0 Equity investment 0 0% d. Prepare the consolidated balance sheet on the date of acquisition. Consolidated Balance Sheet Assets: Cash & receivables Inventory Property & equipment, net Licenses Goodwill $ 0 % 0 % 0 % 0 x 0 % $ 0% Liabilities and stockholders' equity: Current liabilities Other liabilities Note payable Common stock $ 0 % 0 % 0 % x APIC 0 % Retained earnings 0 % $ 0%