The parent company acquired 100% of a subsidiary on 1 January 2014. The parent uses the equity method to account for its investment in the subsidiary. The purchase price paid by the parent was $49,000 in excess of the subsidiary's book value on the acquisition date, and that excess was assigned entirely to an unrecorded Patent owned by the subsidiary. The patent has an estimated useful life of 7 years. The wholly-owned subsidiary sells inventory to the parent. The parent ultimately sells the inventory to unrelated third parties. Any inventory not remaining at year end has been sold to unrelated third parties. You are given the following information for intercompany inventory sales for 2015 and 2016: Inventory sales $55,000 $45,000 Gross Profit in El $9,000 $27,000 2016 2015 Given the 31 December 2016 financial statements provided to you, prepare the consolidation spreadsheet for the year ended 31 December 2016. Use the following Notes for your elimination entries: A, C, D, E, Icogs, Isales. Consolidation Entries Dr Parent Subsidiary Cr Consolidated 31 December 2016 Income Statement: Sales Cost of goods sold (4,500,000) 3,250,000 (650,000) 450,000 (200,000) Gross profit Equity income from subsidiary Operating expenses Net income (1,250,000) (86,000) 670,000 (666,000) 125,000 (75,000) Statement of Retained Earnings: BOY retained earnings Net income Dividends EOY retained earnings (1,250,000) (666,000) 75,000 (1,841,000) (250,000) (75,000) 7,500 (317,500) Balance Sheet: Cash Accounts receivable Inventory Building, net Patent Equity investment 479,500 250,000 150,000 5,000,000 455,000 37,500 75,000 800,000 461,500 7,266,000 Accounts payable Other current liabilities Long-term liabilities Common stock APIC Retained earnings 6,341,000 1,367,500 (450,000) (150,000) (700,000) (250,000) (3,000,000) (525,000) (300,000) (75,000) (50,000) (50,000) (1,841,000) (317,500) (6,341,000) (1,367,500) The parent company acquired 100% of a subsidiary on 1 January 2014. The parent uses the equity method to account for its investment in the subsidiary. The purchase price paid by the parent was $49,000 in excess of the subsidiary's book value on the acquisition date, and that excess was assigned entirely to an unrecorded Patent owned by the subsidiary. The patent has an estimated useful life of 7 years. The wholly-owned subsidiary sells inventory to the parent. The parent ultimately sells the inventory to unrelated third parties. Any inventory not remaining at year end has been sold to unrelated third parties. You are given the following information for intercompany inventory sales for 2015 and 2016: Inventory sales $55,000 $45,000 Gross Profit in El $9,000 $27,000 2016 2015 Given the 31 December 2016 financial statements provided to you, prepare the consolidation spreadsheet for the year ended 31 December 2016. Use the following Notes for your elimination entries: A, C, D, E, Icogs, Isales. Consolidation Entries Dr Parent Subsidiary Cr Consolidated 31 December 2016 Income Statement: Sales Cost of goods sold (4,500,000) 3,250,000 (650,000) 450,000 (200,000) Gross profit Equity income from subsidiary Operating expenses Net income (1,250,000) (86,000) 670,000 (666,000) 125,000 (75,000) Statement of Retained Earnings: BOY retained earnings Net income Dividends EOY retained earnings (1,250,000) (666,000) 75,000 (1,841,000) (250,000) (75,000) 7,500 (317,500) Balance Sheet: Cash Accounts receivable Inventory Building, net Patent Equity investment 479,500 250,000 150,000 5,000,000 455,000 37,500 75,000 800,000 461,500 7,266,000 Accounts payable Other current liabilities Long-term liabilities Common stock APIC Retained earnings 6,341,000 1,367,500 (450,000) (150,000) (700,000) (250,000) (3,000,000) (525,000) (300,000) (75,000) (50,000) (50,000) (1,841,000) (317,500) (6,341,000) (1,367,500)
