Consolidation spreadsheet for continuous sale of inventory-Equity method
Consolidation spreadsheet for continuous sale of inventory-Equity method
Assume a parent company acquired a subsidiary on January 1. 2016. The purchase price was S600,000 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:
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 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:
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.
follow:
The financial statements of the parent and its subsidiary for the year ended December 31, 2019,
Homework Answers
| Activity for the 100% AAP through december 31, 2019 | |||||
| AAP | Original Amount | Original useful life | Amortization per year | ||
| Property, Plant Equipment (PPE), net | 1,20,000 | 20 | 6000 | ||
| Customer list | 210000 | 10 | 21000 | ||
| Royalty Agreement | 150000 | 10 | 15000 | ||
| Goodwill | 120000 | Indefinite | |||
| Year ended December 31 | |||||
| 100% Amortization - Dr (Cr) | 2013 | 2014 | 2015 | 2016 | |
| Property, Plant Equipment (PPE), net | 6000 | 6000 | 6000 | 6000 | |
| Customer list | 21000 | 21000 | 21000 | 21000 | |
| Royalty Agreement | 15000 | 15000 | 15000 | 15000 | |
| Goodwill | |||||
| Net Amortization | 42000 | 42000 | 42000 | 42000 | |
| Jan-01 | December 31st | ||||
| 100% Unamortization - Dr (Cr) | 2013 | 2013 | 2014 | 2015 | 2016 |
| Property, Plant Equipment (PPE), net | 1,20,000 | 1,14,000 | 1,08,000 | 1,02,000 | 96,000 |
| Customer list | 210000 | 189000 | 168000 | 147000 | 126000 |
| Royalty Agreement | 150000 | 135000 | 120000 | 105000 | 90000 |
| Goodwill | 120000 | 120000 | 120000 | 120000 | 120000 |
| Net unamortization | 6,00,000 | 5,58,000 | 5,16,000 | 4,74,000 | 4,32,000 |
| a. Computation of Income/loss from subsidiary | |||||
| Net Income of Subsidiary | 132000 | ||||
| AAP Depreciation | 42000 | ||||
| Income/loss from subsidiary | 90000 | ||||
| B. Computation of Equity Investment | |||||
| Common stock | 60000 | ||||
| APIC | 84000 | ||||
| Boy Retained earnings | 486000 | ||||
| Boy Unamortized AAP | |||||
| Assets as on 01/01/2016 | |||||
| Property, Plant Equipment (PPE), net | 102000 | ||||
| Customer list | 147000 | ||||
| Royalty Agreement | 105000 | ||||
| Goodwill | 120000 | 474000 | |||
| Equity earnings in subsidiary | 90000 | ||||
| Dividend of subsidiary | -18000 | ||||
| Deferred inventory profit | -14400 | ||||
| equity Investment | 1161600 | ||||
|
Consolidation Journal |
|||||
| Description | Debit | Credit | |||
| Equity income | 90000 | ||||
| Dividends | 18000 | ||||
| Equity investment | 72000 | ||||
| Common stock | 60000 | ||||
| APIC | 84000 | ||||
| Retained earnings | 486000 | ||||
| Equity investment | 630000 | ||||
| Property, Plant Equipment (PPE), net | 102000 | ||||
| Customer list | 147000 | ||||
| Royalty Agreement | 105000 | ||||
| Goodwill | 120000 | ||||
| Equity investment | 474000 |
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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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