Question 6 Not complete Marked out of 10.00 P Flag question Consolidation subsequent to date of acquisition - Equity method with noncontrolling interest and AAP Assume, on January 1, 2016, a parent company acquired an 80% interest in its subsidiary. The total fair value of the controlling and noncontrolling interests was $780,000 over the book value of the subsidiary's Stockholders' Equity on the acquisition date. The parent assigned the excess fair value to the following [A] assets: Initial Useful [A] Asset Fair Value Life (years) Property, plant and equipment (PPE), net $312,000 Patent 130,000 78,000 260,000 $780,000 20 10 Customer list 10 Goodwill Indefinite 80% of the Goodwill is allocated to the parent. The parent and the subsidiary report the following financial statements at December 31, 2019: Parent Subsidiary Parent Subsidiary Income statement: Balance sheet: Sales $10,790,000 $1,560,000 Cash $520,000 $370,500 Cost of goods sold (8,190,000) (780,000) Accounts receivable 780,000 325,000 Gross profit 2,600,000 780,000 Inventory 1,170,000 429,000 Income (loss) from subsidiary 230,880 Equity investment 1,490,320 Operating expenses (2,080,000) (455,000) Property, plant and equipment (PPE), net 2,600,000 1,170,000 Net income $750,880 $325,000 $6,560,320 $2,294,500 Statement of retained earnings: BOY retained earnings $713,440 $760,500 Liabilities and stockholders' equity Net income 750,880 325,000 Current liabilities $1,170,000 $325,000 Dividends (234,000) (65,000) Long-term liabilities 2,600,000 741,000 EOY retained earnings $1,230,320 $1,020,500 Common stock 520,000 91,000 APIC 1,040,000 117,000 Retained earnings 1,230,320 1,020,500 $6,560,320 $2,294,500 a. Disaggregate and document the activity for the 100% Acquisition Accounting Premium (AAP), the controlling interest AAP and the noncontrolling interest AAP. Note: Do not use negative signs with any of your answers below. Unamortized Unamortized Unamortized Unamortized Unamortized 2016 2017 2018 2019 1/1/2016 Amortization 12/31/2016 Amortization 12/31/2017 Amortization 12/31/2018 Amortization 12/31/2019 100% AAPProperty, plant and equipment (PPE), net Patent Customer list Goodwill Parent (80%): Property, plant and equipment (PPE), net Patent Customer list Goodwill Subsidiary (20%): Property, plant and equipment (PPE), net Patent Customer list Goodwill b. Calculate and organize the profits and losses on intercompany transactions and balances. Downstream Upstream jan. 1. 2019 Dec 31, 2019 C. Compute the pre-consolidation Equity Investment account beginning and ending balances starting with the stockholders' equity of the subsidiary. Round answers to the nearest whole number. . Equity investment at 1/1/19: 80% x book value of the net assets of subsidiary Equity investment at 12/31/19: 80% x book value of the net assets of subsidiary d. Reconstruct the activity in the parent's pre-consolidation Equity Investment T-account for the year of consolidation. Round answers to the nearest whole number. Equity Investment Balance at 1/1/19 Dividends Balance at 12/31/19 e. Independently compute the owners' equity attributable to the noncontrolling interest beginning and ending balances starting with the owners' equity of the subsidiary. Round answers to the nearest whole number. Noncontrolling interest at 1/1/19: 20% of book value of the net assets of subsidiary NCI Noncontrolling interest at 12/31/19: 20% of book value of the net assets of subsidiary NCI f. Independently calculate consolidated net income, controlling interest net income and noncontrolling interest net income. Round answers to the nearest whole number. Use negative signs with answers that reduce net income. Consolidated: Parent's stand-alone net income Subsidiary's stand-alone net income Less: Consolidated net income Parent: Parent's stand-alone net income 80% of subsidiary's stand-alone net income Less: Consolidated net income attributable to the controlling interest Subsidiary: 20% of subsidiary's stand-alone net income Less: . Consolidated net income attributable to the noncontrolling interest g. Complete the consolidating entries according to the C-E-A-D-1 sequence. Consolidation Worksheet Description Debit [C] Equity income Credit 0 Dividends Equity investment [E] Common stock APIC . Equity investment [A] Property, plant and equipment (PPE), net Patent Customer list . Equity investment 0 [D] > Patent Customer list Check Question 6 Not complete Marked out of 10.00 P Flag question Consolidation subsequent to date of acquisition - Equity method with noncontrolling interest and AAP Assume, on January 1, 2016, a parent company acquired an 80% interest in its subsidiary. The total fair value of the controlling and noncontrolling interests was $780,000 over the book value of the subsidiary's Stockholders' Equity on the acquisition date. The parent assigned the excess fair value to the following [A] assets: Initial Useful [A] Asset Fair Value Life (years) Property, plant and equipment (PPE), net $312,000 Patent 130,000 78,000 260,000 $780,000 20 10 Customer list 10 Goodwill Indefinite 80% of the Goodwill is allocated to the parent. The parent and the subsidiary report the following financial statements at December 31, 2019: Parent Subsidiary Parent Subsidiary Income statement: Balance sheet: Sales $10,790,000 $1,560,000 Cash $520,000 $370,500 Cost of goods sold (8,190,000) (780,000) Accounts receivable 780,000 325,000 Gross profit 2,600,000 780,000 Inventory 1,170,000 429,000 Income (loss) from subsidiary 230,880 Equity investment 1,490,320 Operating expenses (2,080,000) (455,000) Property, plant and equipment (PPE), net 2,600,000 1,170,000 Net income $750,880 $325,000 $6,560,320 $2,294,500 Statement of retained earnings: BOY retained earnings $713,440 $760,500 Liabilities and stockholders' equity Net income 750,880 325,000 Current liabilities $1,170,000 $325,000 Dividends (234,000) (65,000) Long-term liabilities 2,600,000 741,000 EOY retained earnings $1,230,320 $1,020,500 Common stock 520,000 91,000 APIC 1,040,000 117,000 Retained earnings 1,230,320 1,020,500 $6,560,320 $2,294,500 a. Disaggregate and document the activity for the 100% Acquisition Accounting Premium (AAP), the controlling interest AAP and the noncontrolling interest AAP. Note: Do not use negative signs with any of your answers below. Unamortized Unamortized Unamortized Unamortized Unamortized 2016 2017 2018 2019 1/1/2016 Amortization 12/31/2016 Amortization 12/31/2017 Amortization 12/31/2018 Amortization 12/31/2019 100% AAPProperty, plant and equipment (PPE), net Patent Customer list Goodwill Parent (80%): Property, plant and equipment (PPE), net Patent Customer list Goodwill Subsidiary (20%): Property, plant and equipment (PPE), net Patent Customer list Goodwill b. Calculate and organize the profits and losses on intercompany transactions and balances. Downstream Upstream jan. 1. 2019 Dec 31, 2019 C. Compute the pre-consolidation Equity Investment account beginning and ending balances starting with the stockholders' equity of the subsidiary. Round answers to the nearest whole number. . Equity investment at 1/1/19: 80% x book value of the net assets of subsidiary Equity investment at 12/31/19: 80% x book value of the net assets of subsidiary d. Reconstruct the activity in the parent's pre-consolidation Equity Investment T-account for the year of consolidation. Round answers to the nearest whole number. Equity Investment Balance at 1/1/19 Dividends Balance at 12/31/19 e. Independently compute the owners' equity attributable to the noncontrolling interest beginning and ending balances starting with the owners' equity of the subsidiary. Round answers to the nearest whole number. Noncontrolling interest at 1/1/19: 20% of book value of the net assets of subsidiary NCI Noncontrolling interest at 12/31/19: 20% of book value of the net assets of subsidiary NCI f. Independently calculate consolidated net income, controlling interest net income and noncontrolling interest net income. Round answers to the nearest whole number. Use negative signs with answers that reduce net income. Consolidated: Parent's stand-alone net income Subsidiary's stand-alone net income Less: Consolidated net income Parent: Parent's stand-alone net income 80% of subsidiary's stand-alone net income Less: Consolidated net income attributable to the controlling interest Subsidiary: 20% of subsidiary's stand-alone net income Less: . Consolidated net income attributable to the noncontrolling interest g. Complete the consolidating entries according to the C-E-A-D-1 sequence. Consolidation Worksheet Description Debit [C] Equity income Credit 0 Dividends Equity investment [E] Common stock APIC . Equity investment [A] Property, plant and equipment (PPE), net Patent Customer list . Equity investment 0 [D] > Patent Customer list Check