SOLVE ALL PARTS RELATED TO THE PROBLEM TO FULLY SOLVE!!!!
Consolidation spreadsheet for continuous sale of inventory - Equity method Assume that a parent company acquired a subsidiary on January 1, 2016. The purchase price was $600,000 in excess of the subsidiary's book value of Stockholders' Equity on the acquisition date, and that excess was assigned to the following AAP assets: Original Original Useful AAP Asset Amount Life (years) Property, plant and equipment (PPE), net $120,000 20 Customer list 210,000 10 Royalty agreement 150,000 10 Goodwill 120,000 indefinite $600,000 The AAP assets with a definite useful life have been amortized as part of the parent's equity method accounting. The Goodwill asset has been tested annually for impairment, and has not been found to be impaired. Assume that the parent company sells inventory to its wholly owned subsidiary. The subsidiary, ultimately, sells the inventory to customers outside of the consolidated group. You have compiled the following data for the years ending 2018 and 2019: Gross Profit Remaining Inventory in Unsold Receivable Sales Inventory (Payable) 2019 $81,600 $24,000 $32.400 2018 $51,600 $14,400 $15,600 The inventory not remaining at the end of the year has been sold to unaffiliated entities outside of the consolidated group. The parent uses the equity method to account for its Equity Investment. financial statements of the parent and subsidiary for the year ended December 31, follow in part a. Show the computation to yield the pre-consolidation $80,400 Income loss from subsidiary reported by the parent during 2019. Note: Use negative signs with answers when appropriate. 0 Plus: 0 Less: 0 0 AAP depreciation Income (loss) from subsidiary 0 b. Show the computation to yield the Equity Investment balance of $1,152,000 reported by the parent at December 31, 2019. Note: Use negative signs with answers when appropriate. Common stock 0 APIC 0 Retained earnings 0 BOY unamortized AAP 0 BOY deferred profit 0 Income (loss) from subsidiary 0 Dividends 0 0 Equity investment C. Prepare the consolidation entries for the year ended December 31, 2019. Consolidation Worksheet Description Debit Credit [C] 0 Dividends 0 0 0 0 0 0 m 0 Common stock APIC 0 0 0 0 0 0 [A] PPE net 0 0 0 Customer list Royalty agreement 0 0 0 0 0 0 0 0 [D] 0 0 0 PPE net Customer list 0 0 0 0 [lcogs] 2 0 0 0 0 To recognize deferred profit on prior year's sale. [lsales] 0 0 0 0 0 [lcogs] 0 0 0 0 To defer gross profit on the intercompany sale. [lpay] 0 0 0 0 $ 0 $ 0 0 $ 0 $ 0 $ d. Prepare the consolidation spreadsheet for the year ended December 31, 2019. Hint: Use negative signs with answers when appropriate. Elimination Entries Parent Sub Dr Consolidated Income statement: Sales $5,160,000 $939,600 [lsales] 0 Cost of goods sold (3,600,000) (564,000) [lcogs] 0 [lcogs 0 0 [lsales) Gross profit 1,560,000 375,600 0 Income (Loss) from subsidiary 80,400 [C] 0 Operating expenses (996,000) (243,600) [D] 0 Net income $644,400 $132,000 0 Statement of retained earnings: BOY retained earnings $2,619,600 $486,000 [E] $ 0 Net income 644,400 132,000 Dividends (144,000) (18,000) [C] 0 EOY retained earnings $3,120,000 $600,000 0 Balance sheet: Assets Cash $756,000 $300,000 0 Accounts receivable 672,000 228,000 0 [lpay] 0 Inventory 1,020,000 276,000 0 [lcogs] 0 PPE, net 4,800,000 516,000 [A] 0 [D] 0 Customer List [A] 0 0 [D] 0 Royalty agreement [A] 0 0 [D] 0 Goodwill [A] 0 Equity investment 1,152,000 [lcogs) 0 0 [C] 0 0 [E] 0 [A] $8,400,000 $1,320,000 Liabilities and stockholders' equity Accounts payable $360,000 $110,400 [lpay] 0 Other current liabilities 480,000 152,400 0 Long-term liabilities 3,000,000 313,200 0 Common stock 816,000 60,000 [E] 0 APIC 624,000 84,000 [E] 0 Retained earnings 3,120,000 600,000 $8,400,000 $1,320,000 0 $ 0 $ 0 ta 0 0 $ 0 $ 0 0 0 ta $
