This is one question with 3 separate parts.
On January 1, Year 1, Parent Company (P Company) exchanged $3,200,000 cash for 100% of the outstanding voting stock for Subordinate Company (s Company). On the acquisition date, s Company's balance sheet is listed below: SBS 1/1/YR1 Cash Accounts receivable Inventory Buildings (net) Licensing agreements Total Assets 122,000 283,000 350,000 1,875,000 3,000,000 5,630,000 Accounts payable Long-term debt Common stock Retained earnings Total Liabilities and Equity 375,000 2,655,000 1,500,000 1,100,000 5,630,000 The company prepared the following fair value allocation schedule: At the acquisition date, S's buildings have a fair value of $2,375,000 and had a 10-year remaining life. The licensing agreements were overvalued by $150,000 and have a five-year remaining life. Long-term debt is undervalued by $100,000 and had a five-year remaining life. S continues its separate legal existence as a wholly owned subsidiary of P with independent accounting records. P employs the initial value method in its internal accounting for its investment in S. In YR1 S reports net income totaling $275,000 and paid a $25,000 dividend. The following are separate financial statements for P and S for the year ended 12/31/YR2 S (3,000,000) 1,700,000 160,000 350,000 600,000 YR2 Separate Financial Statements for P and S P Sales (7,000,000) Cost of goods sold 4,650,000 Interest expense 255,000 Depreciation expense 585,000 Amortization expense Dividend income (50,000) Net income (1,560,000) Retained earnings 1/1/1/YR2 (5,000,000) Net income (1,560,000) Dividends declared 560,000 Retained earnings 12/31 / YR2 (6,000,000) Cash 433,000 Accounts receivable 1,210,000 Inventory 1,235,000 (190,000) (1,350,000) (190,000) 50,000 (1,490,000) 165,000 200,000 1,500,000 Investment in S 3,200,000 5,572,000 2,040,000 1,800,000 Buildings (net) Licensing agreements Goodwill Total assets Accounts payable Long-term debt Common stock Retained earnings 12/31/YR2 Total liabilities and Shareholders' Equity 350,000 12,000,000 (300,000) (2,700,000) (3,000,000) (6,000,000) (12,000,000) 5,705,000 (715,000) (2,000,000) (1,500,000) (1,490,000) (5,705,000) Required (3 parts) A. Prepare the Fair Value Allocation Schedule. B. Prepare consolidating journal entries SAIDE and C. C. Prepare the consolidating worksheet. On January 1, Year 1, Parent Company (P Company) exchanged $3,200,000 cash for 100% of the outstanding voting stock for Subordinate Company (s Company). On the acquisition date, s Company's balance sheet is listed below: SBS 1/1/YR1 Cash Accounts receivable Inventory Buildings (net) Licensing agreements Total Assets 122,000 283,000 350,000 1,875,000 3,000,000 5,630,000 Accounts payable Long-term debt Common stock Retained earnings Total Liabilities and Equity 375,000 2,655,000 1,500,000 1,100,000 5,630,000 The company prepared the following fair value allocation schedule: At the acquisition date, S's buildings have a fair value of $2,375,000 and had a 10-year remaining life. The licensing agreements were overvalued by $150,000 and have a five-year remaining life. Long-term debt is undervalued by $100,000 and had a five-year remaining life. S continues its separate legal existence as a wholly owned subsidiary of P with independent accounting records. P employs the initial value method in its internal accounting for its investment in S. In YR1 S reports net income totaling $275,000 and paid a $25,000 dividend. The following are separate financial statements for P and S for the year ended 12/31/YR2 S (3,000,000) 1,700,000 160,000 350,000 600,000 YR2 Separate Financial Statements for P and S P Sales (7,000,000) Cost of goods sold 4,650,000 Interest expense 255,000 Depreciation expense 585,000 Amortization expense Dividend income (50,000) Net income (1,560,000) Retained earnings 1/1/1/YR2 (5,000,000) Net income (1,560,000) Dividends declared 560,000 Retained earnings 12/31 / YR2 (6,000,000) Cash 433,000 Accounts receivable 1,210,000 Inventory 1,235,000 (190,000) (1,350,000) (190,000) 50,000 (1,490,000) 165,000 200,000 1,500,000 Investment in S 3,200,000 5,572,000 2,040,000 1,800,000 Buildings (net) Licensing agreements Goodwill Total assets Accounts payable Long-term debt Common stock Retained earnings 12/31/YR2 Total liabilities and Shareholders' Equity 350,000 12,000,000 (300,000) (2,700,000) (3,000,000) (6,000,000) (12,000,000) 5,705,000 (715,000) (2,000,000) (1,500,000) (1,490,000) (5,705,000) Required (3 parts) A. Prepare the Fair Value Allocation Schedule. B. Prepare consolidating journal entries SAIDE and C. C. Prepare the consolidating worksheet
