Question 2 Not complete Marked out of 10.00 P Flag question Consolidation worksheet for gain on constructive retirement of subsidiary's debt with no AAP-Equity method Assume that a Parent company acquires a 80% interest in its subsidiary on January 1, 2015. On the date of acquisition, the fair value of the 80 percent controlling interest was $640,000 and the fair value of the 20 percent noncontrolling Interest was $160,000, On January 1.2015, the book value of net assets equaled $800,000 and the fair value of the identifiable net assets equaled the book value of identifiable net assets (le, there was no AAP or Goodwill). On December 31, 2016, the Subsidiary company issued $800,000 (face) 8 percent, five-year bonds to an unaffiliated company for $832,000. The bonds pay interest annually on December 31, and the bond premium is amortized using the straight-line method. This results in annual bond-payable premium amortization equal to $6,400 per year. On December 31, 2018, the Parent paid $776,000 to purchase all of the outstanding Subsidiary company bonds. The bond discount is amortized using the straight-line method, which results in annual bond-investment discount amortization equal to $8,000 per year. The Parent and the Subsidiary report the following financial statements for the year ended December 31, 2019: Parent Subsidiary Income statement Sales Cost of goods sold Gross profit Operating & other expenses Bond Interest income Bond interest expense Income from subsidiary Net income Statement of retained earnings BOY retained earnings Net income Dividends Ending retained earnings Parent Subsidiary Balance sheet $4,500,000 5800,000 Assets (2.800,000) (500.000) Cash 1.700,000 300,000 Accounts receivable 11.400.000) (146.000) Inventories 72.000 PPE.net (57.000) Equity investment 62.720 Investment in bond (net) $434.720 596.400 Liabilities and stockholders equity $1.577.840 5240,800 Accounts payable 434.720 96-400 Other current liabilities (200,000) (40.000 Dond payable (net) 51,812.500 5297,200 Other long term liabilities common stock APIC Retained earning $700,000 5400,000 850,000 600,000 900,000 800,000 2.000.000 1.500,000 778.500 784,000 56.012,560 53.300.000 5700.000 $450,000 900,000 650.000 812,800 1,000,000 450.000 600,000 140,000 1.000.000 500,000 1,812,560 297 200 6.012.560 1300,000 The parent uses the equity method of pre-consolidation investment bookkeeping, Provide the consolidation entries and prepare a consolidation worksheet for the year ended December 31, 2019. The parent uses the equity method of pre-consolidation investment bookkeeping, Provide the consolidation entries and prepare a consolidation worksheet for the year ended December 31, 2019 Round answers to the nearest whole number. Consolidation Journal Description Debit 10 Equity Income Credit 0 0 0 0 0 0 0 0 0 0 Investment in Subsidiary Noncontrolling Interest Common Stock (Subsidiary) APIC (Subsidiary [E] 0 0 0 0 + e 0 0 Noncontrolling interest [bond Bond payable (net) 0 OOOOOOOOO
