QUESTION 2 Not complete Marked out of 63.00 Rag question Consolidation at the end of the first year subsequent to date of acquisition-Cost method (purchase price equals book value) Assume that the parent company acquires its subsidiary on January 1, 2016, by exchanging 31,500 shares of its $1 par value Common Stock, with a market value on the acquisition date of $48 per share, for all of the outstanding voting shares of the acquiree. You have been charged with preparing the consolidation of these two companies at the end of the first year. On the acquisition date, all of the subsidiary's assets and liabilities had fair values equaling their book values. Following are financial statements of the parent and its subsidiary for the year ended December 31, 2016. Parent Subsidiary Parent Subsidiary Balance sheet Income statement Sales Cost of goods sold Gross proft Equity income Operating expenses Net income $3,330,000 $1,890,000 Assets 2,331,000) (1,134,000) Cash $789,660 $486,990 426,240 438,480 646,020 563,220 999,000 756,000 Accounts receivable 39,690 (632,700) (491400) Equity investment $405,990 $264,600 Inventory 1,512,000 Property, plant & equipment 2,441,556 1,294,020 $5,815,476 $2,782,710 Statement of retained earnings BOY retained earning:s Net income Dividends 2,116,800 976,500 Liabilities and stockholders' equity $243,756 180, 180 289,710 235,620 630,000 466,200 126,000 2,419,200 409,500 2,396,610 ,201,410 $5,815,476 $2,782,710 405,990 264,600 Accounts payable (126,180) (39,690) Accrued liabilities $2,396,610 $1,201,410 Ending retained earnings Long.term liabilities Common stock APIC Retained earnings