Business, 16.04.2020 02:24 londonval

Consolidation subsequent to date of acquisition - Equity method with noncontrolling interest and AAP
Assume that, on January 1, 2009, a parent company acquired an 80% interest in its subsidiary. The total fair value of the controlling and noncontrolling interests was $500,000 over the book value of the subsidiary’s Stockholders’ Equity on the acquisition date. The parent assigned the excess to the following [A] assets:

[A] Asset Initial Fair Value Useful Life (years)

[A] Asset Initial
Fair Value Useful
Life (years)
Property, plant and equipment (PPE), net $100,000 10
Customer list 150,000 10
Goodwill 250,000 Indefinite
$500,000
80% of the Goodwill is allocated to the parent. The parent and the subsidiary report the following financial statements at December 31, 2013:

Parent Subsidiary Parent Subsidiary
Income statement: Balance sheet:
Sales $7,330,000 $1,870,500 Assets
Cost of goods sold (5,131,000) (1,122,300) Cash $411,313 $131,511
Gross profit 2,199,000 748,200 Accounts receivable 938,240 433,956
Income (loss) from subsidiary 189,496 Inventory 1,422,020 557,409
Operating expenses (1,392,700) (486,330) Equity investment 1,475,671
Net income $995,796 261,870 Property, plant and equipment (PPE), net 5,374,356 1,280,669
$9,621,600 $2,403,545
Statement of retained earnings:
BOY retained earnings $3,682,592 $966,425 Liabilities and stockholders’ equity
Net income 995,796 261,870 Current liabilities $1,053,321 $433,956
Dividends (199,159) (39,281) Long-term liabilities 2,000,000 500,000
EOY retained earnings $4,479,229 $1,189,014 Common stock 1,198,455 124,700
APIC 890,595 155,875
Retained earnings 4,479,229 1,189,014
$9,621,600
$2,403,545

c. Compute the pre-consolidation Equity Investment account beginning and ending balances starting with the stockholders’ equity of the subsidiary.

Round answers to the nearest whole number.

Equity investment at 1/1/13:
Common stock Answer
APIC Answer
Retained earnings Answer
AnswerCommon stockAPICRetained earningsUnamortized AAP Answer
Answer
Equity investment at 12/31/13:
Common stock Answer
APIC Answer
Retained earnings Answer
AnswerCommon stockAPICRetained earningsUnamortized AAP Answer
Answer

Answers: 2

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Consolidation subsequent to date of acquisition - Equity method with noncontrolling interest and AAP...

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