Prepare consolidation spreadsheet for intercompany sale of equipment- Equity Method Assume a parent company acquired its...
Prepare consolidation spreadsheet for intercompany sale of equipment- Equity Method
Assume a parent company acquired its subsidiary on January 1, 2015, at a purchase price that was $222,000 in excess of the book value of the subsidiary's Stockholders' Equity on the acquisition date. Of that excess, $132,000 was assigned to a Customer List that is being amortized over a 10-year period. The remaining $90,000 was assigned to Goodwill.
In January of 2018, the wholly owned subsidiary sold Equipment to the parent for a cash price of $72,000. The subsidiary had acquired the equipment at a cost of $84,000 and depreciated the equipment over its 10-year useful life using the straight-line method (no salvage value). The subsidiary had depreciated the equipment for 4 years at the time of sale. The parent retained the depreciation policy of the subsidiary and depreciated the equipment over its remaining 6-year useful life.
Following are financial statements of the parent and its subsidiary for the year ended December 31, 2019. The parent uses the equity method to account for its Equity Investment. The Customer List was amortized as part of the parent's equity method accounting.
| PARENT | SUBSIDIARY | |
| Income statement | ||
| Sales | $4,800,000 | $720,000 |
| COGS | (3,480,000) | (420,000) |
| Gross profit | 1,320,000 | 300,000 |
| Income (loss) from subsidiary | 74,400 | 0 |
| Operating expenses | (1,094,400) | (216,000) |
| Net income | $300,000 | $84,000 |
| PARENT | SUBSIDIARY | |
| Statement of retained earnings | ||
| Beginning retained earning | $2,268,000 | $168,000 |
| Net income | 300,000 | 84,000 |
| Dividends | (168,000) | (12,000) |
| Ending retained earnings | $2,400,000 | $240,000 |
| PARENT | SUBSIDIARY | |
| Balance sheet | ||
| Assets | ||
| Cash | $330,000 | $192,000 |
| A/R | 420,000 | 258,000 |
| Inventory | 780,000 | 330,000 |
| PPE, net | 3,030,000 | 618,000 |
| Equity investment | 540,000 | 0 |
| $5,100,000 | $1,398,000 | |
| Liabilities and stockholders' equity | ||
| A/P | $390,000 | $99,600 |
| Other current liabilities | 480,000 | 120,000 |
| Long term liabilities | 900,000 | 780,000 |
| Common stock | 330,000 | 68,400 |
| APIC | 600,000 | 90,000 |
| Retained earnings | 2,400,000 | 240,000 |
| $5,100,000 | 1,398,000 |
a. Prepare the journal entry that the subsidiary made to record the sale of the equipment to the parent, the journal entry that the parent made to record the purchase and the [I] entries for the year of sale.
b. Compute the remaining portion of the deferred gain on January 1, 2019.
c. Show the computation to yield the $74,000 of Income (loss) from the subsidiary reported by the parent for the year ended December 31, 2019.
d. Compute the Equity Investment balance of $540,000 on December 31, 2019.
e. Prepare the consolidation entries for the year ended December 31, 2019.
f. Prepare the consolidation spreadsheet for the year ended December 31, 2019.
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Prepare consolidation spreadsheet for intercompany sale
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50. Prepare consolidation spreadsheet for intercompany sale of equipment-Equity method Assume a parent company acquired its...
50. Prepare consolidation spreadsheet for intercompany sale of
equipment-Equity method Assume a parent company acquired its
subsidiary on January 1, 2015, at a purchase price that was
$222,000 in excess of the book value of the subsidiary's
Stockholders' Equity on the acquisition date. Of that excess,
$132,000 was assigned to a Customer List that is being amortized
over a 10-year period. The remaining $90,000 was assigned to
Goodwill. In January of 2018, the wholly owned subsidiary sold
Equipment to the...
Prepare consolidation spreadsheet for intercompany sale of equipment - Equity method Assume a parent company acquired...
Prepare consolidation spreadsheet for intercompany sale
of equipment - Equity method
Assume a parent company acquired its subsidiary on January 1, 2015,
at a purchase price that was $222,000 in excess of the book value
of the subsidiary’s Stockholders’ Equity on the acquisition date.
Of that excess, $132,000 was assigned to a Customer List that is
being amortized over a 10-year period. The remaining $90,000 was
assigned to Goodwill.
In January of 2018, the wholly owned subsidiary sold Equipment
to...
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Prepare consolidation spreadsheet for intercompany sale
of equipment - Equity method
Assume a parent company acquired its subsidiary on January 1, 2015,
at a purchase price that was $222,000 in excess of the book value
of the subsidiary’s Stockholders’ Equity on the acquisition date.
Of that excess, $132,000 was assigned to a Customer List that is
being amortized over a 10-year period. The remaining $90,000 was
assigned to Goodwill.
In January of 2018, the wholly owned subsidiary sold Equipment
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