Required:

A) Calculate the initial goodwill arising from this acquisition, and its allocation to the controlling and noncontrolling interests.

B) Prepare a schedule computings Parent's equity in net income of Subsidiary and noncontrolling interest in net income for 2020.

C) Prepare a working paper to consolidate the trial balances of Parent and Subsidiary at December 31, 2020.

Please show all work.

Consolidation Working Paper, Noncontrolling Interest, Intercompany Merchandise Transactions Parent Company acquired 65% of the outstanding stock of Subsidiary Company on December 31, 2017 for cash and stock totaling $84,800. Assume that Subsidiary's assets and liabilities were fairly reported at the date of acquisition, except for these items: Book Value Fair Value $ 120,000 $ 108,000 Plant & Equipment, net (12-year life, straight-line) Veggie Burger recipe (8-year life, straight-line) Long-term debt (5-year life, straight-line) 0 20,000 27,200 24,000 1 Subsidiary's book value at the date of acquisition was $59,200, and the fair value of the 35% 2 noncontrolling interest was $39,200. It is now December 31, 2020 (the end of the 3rd year since acquisition). Impairment testing on the goodwill reveals that total impairment 4 during 2018-2019 is $1,600, and impairment in 2020 is $500. 6 Subsidiary sells merchandise and raw materials to Parent's at a markup of 25% on cost. 7 Here is information on these intercompany sales: B Inventory, January 01, 2020, reported on Parent's books $ 8,500 Inventory, December 31, 2020, reported on Parent's books 10,400 . Transfer price for 2020 sales from Subsidiary to Parent's 48,000 1 2 Below are the separate trial balances of Parent's and Subsidiary at December 31, 2020. 3 Dr(Cr) 4 Parent Subsidiary 5 Current assets $ 26,800 $ 14,400 Plant and equipment, net 210,120 153,600 7 Investment in Subsidiary 91,179 0 B Identifiable intangibles 80,000 8,000 Current liabilities (24,000) (20,000) Long-term debt (280,000) (80,000) 1 Capital stock (64,000) (43,200) 2 Retained earnings, January 1 (35,465) (30,400) 3 Dividends 1,600 4 Sales revenue (320,000) (112,000) Equity in net income of Subsidiary (1,434) 0 6 Cost of sales 200,000 52,000 7 Operating expenses 114,400 56,000 B Totals $ 0$ 0 9 Required: 1 (a) Calculate the initial goodwill arising from this acquisition, and its allocation to 2 the controlling and noncontrolling interests. 3 (b) Prepare a schedule computing Parent's equity in net income of Subsidiary and 4 noncontrolling interest in net income for 2020. 5 (c) Prepare a working paper to consolidate the trial balances of Parent and 6 Subsidiary at December 31, 2020. 7 2,400 B C D E F G H K M N Consolidated Eliminations (1-3) (E) (R) (0) (N) Balances 1 Lconsolidation Working Paper, Noncontrolling Interest, Intercompany Merchandise Transactions 2 (c) Prepare a working paper to consolidate the trial balances of Parent and Subsidiary at December 31, 2020. 3 Show debits as positive numbers and credits as negative numbers. 4 Consolidation Trial Balances 5 Working Paper Parent Subsidiary (C) (I-1) (I-2) 6 Current assets 26,800 14,400 7 Plant and equipment, net 210,120 153,600 8 Investment in Subsidiary 91,179 9 Identifiable intangibles 80,000 8,000 10 Goodwill 11 Current liabilities (24,000) (20,000) 12 Long-term debt (280,000) (80,000) 13 Capital stock (64,000) (43,200) 14 Retained earnings, Jan. 1 (35,465) (30,400) 15 Dividends 2,400 1,600 16 Noncontrolling interest in Subsidiary 17 Sales revenue (320,000) (112,000) 18 Equity in NI of Subsidiary (1,434) 19 Cost of goods sold 200,000 52,000 20 Operating expenses 114,400 56,000 21 Noncontrolling interest in NI 22 Total 0 0 23 Consolidation Working Paper, Noncontrolling Interest, Intercompany Merchandise Transactions Parent Company acquired 65% of the outstanding stock of Subsidiary Company on December 31, 2017 for cash and stock totaling $84,800. Assume that Subsidiary's assets and liabilities were fairly reported at the date of acquisition, except for these items: Book Value Fair Value $ 120,000 $ 108,000 Plant & Equipment, net (12-year life, straight-line) Veggie Burger recipe (8-year life, straight-line) Long-term debt (5-year life, straight-line) 0 20,000 27,200 24,000 1 Subsidiary's book value at the date of acquisition was $59,200, and the fair value of the 35% 2 noncontrolling interest was $39,200. It is now December 31, 2020 (the end of the 3rd year since acquisition). Impairment testing on the goodwill reveals that total impairment 4 during 2018-2019 is $1,600, and impairment in 2020 is $500. 6 Subsidiary sells merchandise and raw materials to Parent's at a markup of 25% on cost. 7 Here is information on these intercompany sales: B Inventory, January 01, 2020, reported on Parent's books $ 8,500 Inventory, December 31, 2020, reported on Parent's books 10,400 . Transfer price for 2020 sales from Subsidiary to Parent's 48,000 1 2 Below are the separate trial balances of Parent's and Subsidiary at December 31, 2020. 3 Dr(Cr) 4 Parent Subsidiary 5 Current assets $ 26,800 $ 14,400 Plant and equipment, net 210,120 153,600 7 Investment in Subsidiary 91,179 0 B Identifiable intangibles 80,000 8,000 Current liabilities (24,000) (20,000) Long-term debt (280,000) (80,000) 1 Capital stock (64,000) (43,200) 2 Retained earnings, January 1 (35,465) (30,400) 3 Dividends 1,600 4 Sales revenue (320,000) (112,000) Equity in net income of Subsidiary (1,434) 0 6 Cost of sales 200,000 52,000 7 Operating expenses 114,400 56,000 B Totals $ 0$ 0 9 Required: 1 (a) Calculate the initial goodwill arising from this acquisition, and its allocation to 2 the controlling and noncontrolling interests. 3 (b) Prepare a schedule computing Parent's equity in net income of Subsidiary and 4 noncontrolling interest in net income for 2020. 5 (c) Prepare a working paper to consolidate the trial balances of Parent and 6 Subsidiary at December 31, 2020. 7 2,400 B C D E F G H K M N Consolidated Eliminations (1-3) (E) (R) (0) (N) Balances 1 Lconsolidation Working Paper, Noncontrolling Interest, Intercompany Merchandise Transactions 2 (c) Prepare a working paper to consolidate the trial balances of Parent and Subsidiary at December 31, 2020. 3 Show debits as positive numbers and credits as negative numbers. 4 Consolidation Trial Balances 5 Working Paper Parent Subsidiary (C) (I-1) (I-2) 6 Current assets 26,800 14,400 7 Plant and equipment, net 210,120 153,600 8 Investment in Subsidiary 91,179 9 Identifiable intangibles 80,000 8,000 10 Goodwill 11 Current liabilities (24,000) (20,000) 12 Long-term debt (280,000) (80,000) 13 Capital stock (64,000) (43,200) 14 Retained earnings, Jan. 1 (35,465) (30,400) 15 Dividends 2,400 1,600 16 Noncontrolling interest in Subsidiary 17 Sales revenue (320,000) (112,000) 18 Equity in NI of Subsidiary (1,434) 19 Cost of goods sold 200,000 52,000 20 Operating expenses 114,400 56,000 21 Noncontrolling interest in NI 22 Total 0 0 23