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Question 8 Not complete Marked out of 89.00 P Flag question Consolidation worksheet for gain on constructive retirement of subsidiary's debt with no AAP-Cost method Assume that a parent company acquires a 75% interest in its subsidiary on January 1, 2015. On the date of acquisition, the fair value of the 75 value of the 25 percent noncontrolling interest was $200,000. On January 1, 2015, the book value of net assets equaled $800,000 and the fair va value of identifiable net assets (i.e. there was no AAP or Goodwill). On January 1, 2015, the retained earnings of the subsidiary was $150,000, On December 31, 2016, the Subsidiary company issued $750,000 (face) 6 percent, five-year bonds to an unaffiliated company for $765,000. The bond premium is amortized using the straight line method. This results in annual bond-payable premium amortization equal to $3,000 per yea amortization schedule from the initial issuance date. Year Cash Payment Amortization of Premium Interest Expense Carrying Amount Dec 31, 2016 $765,000 Dec 31, 2017 $45,000 $3,000 $42,061 762,000 Dec 31, 2018 45,000 3,000 42,000 759,000 Dec 31, 2019 45,000 3,000 42,000 756,000 Dec 31, 2020 45,000 3,000 42.000 753,000 Dec 31, 2021 45,000 3,000 42.000 750,000 On December 31, 2018, the Parent paid $735,000 to purchase all of the outstanding Subsidiary company bonds. The bond discount is amortize annual bond-investment discount amortization equal to $5,000 per year. The following schedule provides the bond-amortization schedule for Cash Payment Amortization of Discount Interest Income Carrying Amount Year ith no AAP-Cost method 5. On the date of acquisition, the fair value of the 75 percent controlling interest was $600,000 and the fair ok value of net assets equaled $800,000 and the fair value of the identifiable net assets equaled the book e retained earnings of the subsidiary was $150,000. ar bonds to an unaffiliated company for $765,000. The bonds pay interest annually on December 31, and the ayable premium amortization equal to $3,000 per year. The following schedule provides the bond- diary company bonds. The bond discount is amortized using the straight-line method, which results in hedule provides the bond-amortization schedule for the Parent's bond investment. On December 31, 2018, the Parent paid $735,000 to purchase all of the outstanding Subsidiary company bonds. The bond discount is amorired using the line method, which nutsin annual bond investment discount amortization equal to $5,000 per year. The following schedule provides the bond-amortization schedule for the Parent's bond investment Year Cash Payment Amortization of Discount Interest Income Carrying Amount Dec. 31. 2018 3735.000 Dec 31, 2019 45.000 $5.000 550.000 700.000 Dec 1, 2020 45,000 5.000 50,000 745.000 Dec 352021 25.000 5.000 50,000 750.000 The parent uses the cost method of pre-consolidation investment bookkeeping. The Parent and the Subsidiary report the following financial statements for the year ended December 31, 2019 Parent Subsidiary Parent Subsidiary Income statement Balance sheet Sales $6.500.000 $800.000 Assets Cost of goods sold 14.500,000) 1450.000 Caribe 5700.000 5300.000 Gross profit 2.800,000 350.000 Accounts receivable B00.000 500.000 Operating and other expenses 1.500.000 200.000 inventories 1.000.000 B00.000 Bond interest income 50.000 PPL ne 1.000.000 250.000 Bond interestepense (49.0003 Equity investment 600.000 Total expenses 11.450.000) (242.0001 Ivestment in bond.net 740.000 Income from subsidiary 30,000 16.840.000 250.000 Net income 5580,000 $10.000 band stockholders' equity Statement of retained earnings Accounts payable $800.000 $250.000 BOY retained earnings $760,000 $276.000 the current lates 900.000 400.000 Net income 580,000 105,000 Bond payable in 756,000 Dividends 1200.000 1.400.000 450,000 140.0000 Other long-termes 11,140,000 Ending retained earnings 5344000 Common stock 600.000 150,000 APIC 2.000.000 500.000 Retained as 1.100.000 344000 2000 UVU Provide the consolidation entries and prepare a consolidation worksheet for the year ended December 31, 2019. Round answers to the nearest whole number. Consolidation Journal Description Debit Credit [AD]] . 0 0 0 0 [C] Income from subsidiary 0 0 0 0 0 0 0 0 [E] Noncontrolling Interest Common Stock (Subsidiary) APIC (Subsidiary) 0 0 0 0 0 0 0 . 0 0 0 Noncontrolling interest [lbond] Bond payable, net 0 0 > 0 O O OOO 0 Interest expense Investment in Subsidiary 0 Use negative signs with your answers in the Consolidated column for: Cost of goods sold, all expenses (inc. Total ex 0 Ooo use negative signs with your answers in the Consolidated column for Cost of goods sold, all expenses (inc. Total expenses), Income attributable to NCI and Dividends. Consolidation Worksheet Parent Subsidiary Debit Credit Income Statement Consolidated Sales 3.500.000 $300.000 0 Cost of goods sold 14.500.000 450,000) Gross pront 2.000.000 350.000 D Operating and other expenses (1.500,000 1200,000) 0 Bond interest income 50000 bond) 0 O Bond interest expense 12.000) Ond) D Total expenses 11,450.0001 (242.000) Income from Subsidiary 30,000 10 0 Consolidated Net Income SHO,000 10.000 Income attributable to NG Ia O Inconte attributable to control int 5580,000 S108.000 5 Retained Earnings Statement Bee Ret Earnings $760,000 $276.000 TE! 0 0 TADI 0 Income attributable to control in 580,000 100.000 Dividends Declared 200,0001 [40.0001 ICI D Ending Retained Earnings 51.140,000 5344.000 $ Balance Sheet $700,000 Cash D $300.000 Accounts receivable 800,000 500,000 1,000,000 Inventories D 800,000 Property, Plant & Equipment.net 3,000,000 1.250,000 600,000 (ADNI Investment in Subsidiary 0 LE O bond O libond) D Investment in Bond (net) 740.000 $ 0 Total Assets $6.540,000 $2,850,000 Accounts Payable $800,000 5250.000 0 Other current liabilities 900,000 400,000 0 756.000 (handi Bond Payable ined D 0 n Dividends Declared 0 [C (200,000) $1,140,000 (40,000) $344,000 OO $ Ending Retained Earnings Balance Sheet Cash Accounts receivable Inventories $700,000 $300,000 800,000 500,000 1,000,000 800,000 3,000,000 1,250,000 600,000 Property, Plant & Equipment, net Investment in Subsidiary [ADD] 0 0 [E] 0 [lbond) 0 [lbond) 0 0 0 0 0 0 Investment in Bond (net) Total Assets Accounts Payable Other current liabilities Bond Payable (net) Other long-term liabilities Common Stock APIC Retained Earnings Noncontrolling Interest 740,000 $6,840,000 $2,850,000 $800,000 $250,000 900,000 400,000 756,000 [lbond) 1,400,000 450,000 600,000 150,000 [E] 2,000,000 500,000 [E] 1,140,000 344,000 0 0 0 0 0 0 0 0 [C] [E] 0 0 $ 0 $ 0 $ Total Liabilities and Equity $6,840,000 $2,850,000 Question 8 Not complete Marked out of 89.00 P Flag question Consolidation worksheet for gain on constructive retirement of subsidiary's debt with no AAP-Cost method Assume that a parent company acquires a 75% interest in its subsidiary on January 1, 2015. On the date of acquisition, the fair value of the 75 value of the 25 percent noncontrolling interest was $200,000. On January 1, 2015, the book value of net assets equaled $800,000 and the fair va value of identifiable net assets (i.e. there was no AAP or Goodwill). On January 1, 2015, the retained earnings of the subsidiary was $150,000, On December 31, 2016, the Subsidiary company issued $750,000 (face) 6 percent, five-year bonds to an unaffiliated company for $765,000. The bond premium is amortized using the straight line method. This results in annual bond-payable premium amortization equal to $3,000 per yea amortization schedule from the initial issuance date. Year Cash Payment Amortization of Premium Interest Expense Carrying Amount Dec 31, 2016 $765,000 Dec 31, 2017 $45,000 $3,000 $42,061 762,000 Dec 31, 2018 45,000 3,000 42,000 759,000 Dec 31, 2019 45,000 3,000 42,000 756,000 Dec 31, 2020 45,000 3,000 42.000 753,000 Dec 31, 2021 45,000 3,000 42.000 750,000 On December 31, 2018, the Parent paid $735,000 to purchase all of the outstanding Subsidiary company bonds. The bond discount is amortize annual bond-investment discount amortization equal to $5,000 per year. The following schedule provides the bond-amortization schedule for Cash Payment Amortization of Discount Interest Income Carrying Amount Year ith no AAP-Cost method 5. On the date of acquisition, the fair value of the 75 percent controlling interest was $600,000 and the fair ok value of net assets equaled $800,000 and the fair value of the identifiable net assets equaled the book e retained earnings of the subsidiary was $150,000. ar bonds to an unaffiliated company for $765,000. The bonds pay interest annually on December 31, and the ayable premium amortization equal to $3,000 per year. The following schedule provides the bond- diary company bonds. The bond discount is amortized using the straight-line method, which results in hedule provides the bond-amortization schedule for the Parent's bond investment. On December 31, 2018, the Parent paid $735,000 to purchase all of the outstanding Subsidiary company bonds. The bond discount is amorired using the line method, which nutsin annual bond investment discount amortization equal to $5,000 per year. The following schedule provides the bond-amortization schedule for the Parent's bond investment Year Cash Payment Amortization of Discount Interest Income Carrying Amount Dec. 31. 2018 3735.000 Dec 31, 2019 45.000 $5.000 550.000 700.000 Dec 1, 2020 45,000 5.000 50,000 745.000 Dec 352021 25.000 5.000 50,000 750.000 The parent uses the cost method of pre-consolidation investment bookkeeping. The Parent and the Subsidiary report the following financial statements for the year ended December 31, 2019 Parent Subsidiary Parent Subsidiary Income statement Balance sheet Sales $6.500.000 $800.000 Assets Cost of goods sold 14.500,000) 1450.000 Caribe 5700.000 5300.000 Gross profit 2.800,000 350.000 Accounts receivable B00.000 500.000 Operating and other expenses 1.500.000 200.000 inventories 1.000.000 B00.000 Bond interest income 50.000 PPL ne 1.000.000 250.000 Bond interestepense (49.0003 Equity investment 600.000 Total expenses 11.450.000) (242.0001 Ivestment in bond.net 740.000 Income from subsidiary 30,000 16.840.000 250.000 Net income 5580,000 $10.000 band stockholders' equity Statement of retained earnings Accounts payable $800.000 $250.000 BOY retained earnings $760,000 $276.000 the current lates 900.000 400.000 Net income 580,000 105,000 Bond payable in 756,000 Dividends 1200.000 1.400.000 450,000 140.0000 Other long-termes 11,140,000 Ending retained earnings 5344000 Common stock 600.000 150,000 APIC 2.000.000 500.000 Retained as 1.100.000 344000 2000 UVU Provide the consolidation entries and prepare a consolidation worksheet for the year ended December 31, 2019. Round answers to the nearest whole number. Consolidation Journal Description Debit Credit [AD]] . 0 0 0 0 [C] Income from subsidiary 0 0 0 0 0 0 0 0 [E] Noncontrolling Interest Common Stock (Subsidiary) APIC (Subsidiary) 0 0 0 0 0 0 0 . 0 0 0 Noncontrolling interest [lbond] Bond payable, net 0 0 > 0 O O OOO 0 Interest expense Investment in Subsidiary 0 Use negative signs with your answers in the Consolidated column for: Cost of goods sold, all expenses (inc. Total ex 0 Ooo use negative signs with your answers in the Consolidated column for Cost of goods sold, all expenses (inc. Total expenses), Income attributable to NCI and Dividends. Consolidation Worksheet Parent Subsidiary Debit Credit Income Statement Consolidated Sales 3.500.000 $300.000 0 Cost of goods sold 14.500.000 450,000) Gross pront 2.000.000 350.000 D Operating and other expenses (1.500,000 1200,000) 0 Bond interest income 50000 bond) 0 O Bond interest expense 12.000) Ond) D Total expenses 11,450.0001 (242.000) Income from Subsidiary 30,000 10 0 Consolidated Net Income SHO,000 10.000 Income attributable to NG Ia O Inconte attributable to control int 5580,000 S108.000 5 Retained Earnings Statement Bee Ret Earnings $760,000 $276.000 TE! 0 0 TADI 0 Income attributable to control in 580,000 100.000 Dividends Declared 200,0001 [40.0001 ICI D Ending Retained Earnings 51.140,000 5344.000 $ Balance Sheet $700,000 Cash D $300.000 Accounts receivable 800,000 500,000 1,000,000 Inventories D 800,000 Property, Plant & Equipment.net 3,000,000 1.250,000 600,000 (ADNI Investment in Subsidiary 0 LE O bond O libond) D Investment in Bond (net) 740.000 $ 0 Total Assets $6.540,000 $2,850,000 Accounts Payable $800,000 5250.000 0 Other current liabilities 900,000 400,000 0 756.000 (handi Bond Payable ined D 0 n Dividends Declared 0 [C (200,000) $1,140,000 (40,000) $344,000 OO $ Ending Retained Earnings Balance Sheet Cash Accounts receivable Inventories $700,000 $300,000 800,000 500,000 1,000,000 800,000 3,000,000 1,250,000 600,000 Property, Plant & Equipment, net Investment in Subsidiary [ADD] 0 0 [E] 0 [lbond) 0 [lbond) 0 0 0 0 0 0 Investment in Bond (net) Total Assets Accounts Payable Other current liabilities Bond Payable (net) Other long-term liabilities Common Stock APIC Retained Earnings Noncontrolling Interest 740,000 $6,840,000 $2,850,000 $800,000 $250,000 900,000 400,000 756,000 [lbond) 1,400,000 450,000 600,000 150,000 [E] 2,000,000 500,000 [E] 1,140,000 344,000 0 0 0 0 0 0 0 0 [C] [E] 0 0 $ 0 $ 0 $ Total Liabilities and Equity $6,840,000 $2,850,000