Question

A parent acquires the voting stock of a subsidiary on January 1, 2019. Required revaluations of the subsidiary's net assets are:

*	Previously unreported identifiable intangibles valued at $3 million, with a remaining life of 10 years, straight-line
*	Goodwill

It is now December 31, 2021, three years after the acquisition. The goodwill is unimpaired during this period. The parent reports its investment in the subsidiary using the cost method. The subsidiary reports the following net income, other comprehensive income, and dividends in the three years since the acquisition:

	Net Income	Other Comprehensive Income (Loss)	Dividends
2019	$600,000	$100	$100,000
2020	700,000	120	100,000
2021	750,000	(50)	150,000

Eliminating entry (A) on the 2018 consolidation working paper includes:

	A.	A credit to beginning AOCI of $220
	B.	A credit to beginning retained earnings of $950,000
	C.	A debit to Investment in Subsidiary of $1,300,000
	D.	A credit to beginning retained earnings of $500,220

Answer 1

Allocation of Cost of service departments using Direct method.
From	Maintenance	Personnel	Printing	Developing
Service Department costs	$          3,000.00	$       13,000.00	$        14,100.00	$          11,200.00
Maintenance allocation	$        (3,000.00)		$             750.00	$            2,250.00
Personnel allocation		$      (13,000.00)	$          1,625.00	$          11,375.00
Totals	$                    -	$                    -	$        16,475.00	$          24,825.00
Workings :
Maintenance allocation
Printing : $3000 * 1700 /(1700+5100)	$             750.00
Developing : $3000 * 5100 /(1700+5100)	$          2,250.00
Personnel allocation
Printing : $13000*500/(500+3500)	$          1,625.00
Developing : $13000*3500/(500+3500)	$        11,375.00