Question

Determining ending consolidated balances in the second year following the acquisition—Equity

method

Assume a parent company acquired a subsidiary on January 1, 2015. The purchase price was $745,000

in excess of the subsidiary’s book value of Stockholders’ Equity on the acquisition date, and that excess

was assigned to the following [A] assets:

37. Determining euding consolidated balances in the second year following the acquisition-Equity method Assume a parent company acquired a subsidiary on January 1, 2015. The purchase price was $745,000 in excess of the subsidiary's book value of Stockholders Equity on the acquisition date, and that excess was assigned to the following [A] assets: LO2 Original Amount Original Useful Life [A] Asset Property, plant and equipment (PPE), net Goodwill $360,000 385,000 $745,000 15 yearS Indefinite The AAP asset relating to undervalued PPE with a 15-ycar uscful life has been depreciated as part of thc parent's cquity mcthod accounting. The financial statements of the parent and its subsidiary for the ycar ended Dccember 31, 2016, are as follows: Parent Subsidiary Parent Income statement: Sales. Cost of goods sold Balance sheet: $6,875,000 $1,500,000 Assets (4,950,000) (900,000) Cash 1,925,000 1,295,313 $ 386,500 600,000 Accounts 186,000 (1,031,250) (390,000) Equity investment. $1,079,750 1,760,000 2,667,500 1,875,500 348,000 447,000 Net income. $ 210,000 Property, plant and equipment (PPE), net 14,206,500 827,000 $21,804,813 $2,008,500 . Statement of retained earnings: BOY retained earnings Net income.... $4,639,750 $775,000 Liabilities and stockholders' equity 1,079,750210,000 Accounts payable. .. $ 1,006,500 143,000 (217,000) (31,500) Accrued liabilities.. 1,196,250 187,000 Ending retained earnings $5,502,500 $953,500 Long-term liabilities . 8,750,000 500,000 Common stock. 100,000 125,000 953,500 $21,804,813 $2,008,500 640,563 4,709,000 5,502,500 APIC Retained earnings. . At what amount will the following accounts appear on the consolidated financial statements? a. Sales b. Equity income C. Operating expenscs d. Accounts reccivablc e. Equity investment f. Propcrty, plant and cquipment (PPE), net g. Goodwill h. Common stock i. Rctained camings

Answer 1

Solution:

					(in USD)
		Parent	Subsidiary	Elimination	Total
a	Sales	6875000	1500000	0	8375000
b	Equity income	186000	0	0	186000
c	Operating expense	1031250	390000	0	1421250
d	Accounts receivable	1760000	348000	0	2108000
e	Equity investment	1875500	0	-745000	1130500
f	PPE	14206500	827000	0	15033500
g	Goodwill	385000	0	-385000	0
h	common stock	640563	100000	-100000	640563
i	retianed earnings	5502500	953500	0	6456000

Answer 2

This shit is wrong