Part 2: Problem Solving - Consolidated FinancialsAssume that on 1/1/X0, a parent company acquires a...

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Part 2: Problem Solving - Consolidated Financials Assume that on 1/1/X0, a parent company acquires a 70% interest in its subsidiary for a price at $480,000 over book value. The excess is assigned as...

Part 2: Problem Solving - Consolidated Financials

Assume that on 1/1/X0, a parent company acquires a 70% interest in its subsidiary for a price at $480,000 over book value. The excess is assigned as follows:

Asset	Fair Value	Useful Life
Patent	$320,000	8 years
Goodwill	160,000	Indefinite

70% of the goodwill is allocated to the parent.

Included in the attached Excel spreadsheet are the pre-consolidation financial statements for both the parent and the subsidiary.

Submission Requirements:

Using the ACT470_Mod08-Portfolio_Option01.xlsx Excel spreadsheet in the Module 8 folder:

Prepare the consolidated financial statements at 12/31/X6 by placing the appropriate entries in their respective debit/credit column cells.

Indicate, in the blank column cell to the left of the debit and credit column cells if the entry is a [C], [E], [A], [D] or [I]entry.

Use Excel formulas to derive the Consolidated column amounts and totals.
- Using the "Home" key in Excel, go to the "Styles" area and highlight the [C], [E], [A], [D] or [I]entry cells in different shades.

Answered 1 days AfterMar 31, 2021

Munmun · Accepted Answer

Sheet1
	Calculation amortization expenses
	Assests	initial Value as on 01/01/X0	Life	Amortization per year
		[A]	[B]	[A/B]
	Patent	320000	8	40000
	Goodwill	160000	indefinite	-
	Calculation of unamortized value at the beginning of the year 2016
	Assests	initial Value as on 01/01/x0	Amortization per year	Accumulated Amortization from 01/01/X0 to 31/12/X5	Value as on 01/01/X6
		[A]	[B]	[C=(B*6 Year)]	[A-C]
	Patent	320000	40000	240000	80000
	Goodwill	160000			160000
	Total	480000	40000	240000	240000
Sheet2
				Consolidation Entry
		Parent	Subsidiary		Dr		Cr	Consolidated
	Income Statement
	Sales	6000000	2000000					8000000
	Cost of Goods Sole	-4000000	-1200000
	Gross Profit	2000000	800000					2800000
	Equity Income	112000		[C]	112000
	Operating Expenses	-1500000	-600000	[D]	40000			-2140000
	Net Income	612000	200000					660000
	Consolidated Nl attrib to NCI			[C]	48000			-48000
	Consolidated Nl attrib to CI							612000
	Statement of Retained Earnings
	BOY Retained Earnings 	1978000	970000	[E]	970000			1978000
	Net Income	612000	200000					612000
	Dividends	-190000	-100000			[C]	100000	-190000
	Ending retained earnings	2400000	1070000					2400000
	Balance Sheet:
	Assest
	Cash	200000	120000					320000
	Accounts Receivable	600000	400000					1000000
	Inventory	800000	880000					1680000
	Equity Investment	1400000				[C]	42000
						[E]	1190000
						[A]	168000
	PPE, net	2000000	1200000					3200000
	Patent			[A]	80000	[D]	40000	40000
	Goodwill			[A]	160000			160000
		5000000	2600000					6400000
	Liabilities and Stockholders Equity
	Current Liabilities	500000	200000					700000
	Long-Term Liabilities	1100000	600000					1700000
	Common Stock	600000	280000	[E]	280000			600000
	APIC	400000	450000	[E]	450000			400000
	Retained Earnings	2400000	1070000					3400000
	Noncontrolling interest					[C]	18000
						[E]	510000
						[A]	72000	600000
		5000000	2600000		2140000		2140000
Sheet3
	Working Notes:
	Calculation of net income Attributable to noncontrolling interest
	Net income of Subsidiary					200000
	Less: Amortization of AAP Assets					-40000
	Adujsted net income of Sibsidiary					160000
	Net income Attributable to NCI (160000*30%)					48000
	Equity income (160000*70%)					112000
	Entry C to eliminate the equity income and income attributable to NCI
						Equity investment	NCI
	Equity Income					112000
	Net Income Attributable to NCI						48000
	Dividend (100000*70%), (100000*30%)					-70000	-30000
	Total					42000	18000
	Entry E to eliminate the subsidiary stockholding
						Equity investment	NCI
						70%	30%
	Common Stock (280000)					196000	84000
	APIC (450000)					315000	135000
	BOY Retained Earnings (970000)					679000	291000
	Total					1190000	510000
	Entry A to record the unamortized value of AAP Assets
						Equity investment	NCI
						70%	30%
	Patent (80000)					56000	24000
	Godwill (160000)					112000	48000
	Total					168000	72000

Part 2: Problem Solving - Consolidated Financials Assume that on 1/1/X0, a parent company acquires a 70% interest in its subsidiary for a price at $480,000 over book value. The excess is assigned as...

Answer To: Part 2: Problem Solving - Consolidated Financials Assume that on 1/1/X0, a parent company acquires a...

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