Consolidation subsequent to date of acquisition-Equity method with noncontrolling interest and AAP Assume, on January 1, 2018, a parent company acquired a 90% interest in its subsidiary. The total fair value of the controlling and noncontrolling interest was $660,000 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 Property, plant, and equipment Customer list Goodwill Initial Fair Value Useful Life $220,000 10 years 132,000 5 years 308,000 Indefinite $660,000 90% of the Goodwill is allocated to the parent. The parent and the subsidiary report the following pre-consolidation financial statements at December 31, 2022: Income statement: Sales Cost of goods sold Parent Subsidiary Balance sheet: $7,920,000 2,090,000 Assets Parent Subsidiary Gross profit Equity income Operating expenses 154,440 (1,540,000) (5,500,000) (1,320,000) Cash 2,420,000 770,000 Accounts receivable Inventory (550,000) Equity investment Net income 1,034,440 220,000 Property, plant and equipment, net $550,000 $110,000 1,034,000 1,320,000 275,000 605,000 1,267,200 3,080,000 990,000 Statement of retained earnings: $ 7,521,200 $1,980,000 Beginning retained earnings: Net income Dividends Ending retained earnings $2,741,200 1,926,760 550,000 Liabilities and stockholders' equity 1,034,440 220,000 Current liabilities (220,000) (55,000) Long-term liabilities $715,000 Common stock 1,100,000 440,000 2,200,000 550,000 220,000 110,000 APIC 990,000 165,000 Retained earnings 2,741,200 715,000 $7,251,200 $1,980,000
Consolidation subsequent to date of acquisition-Equity method with noncontrolling interest and AAP Assume, on January 1, 2018, a parent company acquired a 90% interest in its subsidiary. The total fair value of the controlling and noncontrolling interest was $660,000 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 Property, plant, and equipment Customer list Goodwill Initial Fair Value Useful Life $220,000 10 years 132,000 5 years 308,000 Indefinite $660,000 90% of the Goodwill is allocated to the parent. The parent and the subsidiary report the following pre-consolidation financial statements at December 31, 2022: Income statement: Sales Cost of goods sold Parent Subsidiary Balance sheet: $7,920,000 2,090,000 Assets Parent Subsidiary Gross profit Equity income Operating expenses 154,440 (1,540,000) (5,500,000) (1,320,000) Cash 2,420,000 770,000 Accounts receivable Inventory (550,000) Equity investment Net income 1,034,440 220,000 Property, plant and equipment, net $550,000 $110,000 1,034,000 1,320,000 275,000 605,000 1,267,200 3,080,000 990,000 Statement of retained earnings: $ 7,521,200 $1,980,000 Beginning retained earnings: Net income Dividends Ending retained earnings $2,741,200 1,926,760 550,000 Liabilities and stockholders' equity 1,034,440 220,000 Current liabilities (220,000) (55,000) Long-term liabilities $715,000 Common stock 1,100,000 440,000 2,200,000 550,000 220,000 110,000 APIC 990,000 165,000 Retained earnings 2,741,200 715,000 $7,251,200 $1,980,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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am. 102.
![Consolidation subsequent to date of acquisition-Equity method with noncontrolling interest and AAP
Assume, on January 1, 2018, a parent company acquired a 90% interest in its subsidiary. The total fair value of the controlling and noncontrolling interest was $660,000 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
Property, plant, and equipment
Customer list
Goodwill
Initial
Fair Value
Useful
Life
$220,000 10 years
132,000 5 years
308,000 Indefinite
$660,000
90% of the Goodwill is allocated to the parent. The parent and the subsidiary report the following pre-consolidation financial statements at December 31, 2022:
Income statement:
Sales
Cost of goods sold
Parent
Subsidiary
Balance sheet:
$7,920,000 2,090,000 Assets
Parent
Subsidiary
Gross profit
Equity income
Operating expenses
154,440
(1,540,000)
(5,500,000) (1,320,000) Cash
2,420,000
770,000 Accounts receivable
Inventory
(550,000) Equity investment
Net income
1,034,440
220,000 Property, plant and equipment, net
$550,000 $110,000
1,034,000
1,320,000
275,000
605,000
1,267,200
3,080,000
990,000
Statement of retained earnings:
$ 7,521,200 $1,980,000
Beginning retained earnings:
Net income
Dividends
Ending retained earnings
$2,741,200
1,926,760 550,000 Liabilities and stockholders' equity
1,034,440 220,000 Current liabilities
(220,000) (55,000) Long-term liabilities
$715,000 Common stock
1,100,000 440,000
2,200,000 550,000
220,000
110,000
APIC
990,000
165,000
Retained earnings
2,741,200
715,000
$7,251,200 $1,980,000](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc275072a-e92e-4ade-9758-9a3bd88f6bb5%2F4789a9a8-a491-4b1f-aab6-2de971a8b62d%2F3ew1hg9_processed.png&w=3840&q=75)
Transcribed Image Text:Consolidation subsequent to date of acquisition-Equity method with noncontrolling interest and AAP
Assume, on January 1, 2018, a parent company acquired a 90% interest in its subsidiary. The total fair value of the controlling and noncontrolling interest was $660,000 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
Property, plant, and equipment
Customer list
Goodwill
Initial
Fair Value
Useful
Life
$220,000 10 years
132,000 5 years
308,000 Indefinite
$660,000
90% of the Goodwill is allocated to the parent. The parent and the subsidiary report the following pre-consolidation financial statements at December 31, 2022:
Income statement:
Sales
Cost of goods sold
Parent
Subsidiary
Balance sheet:
$7,920,000 2,090,000 Assets
Parent
Subsidiary
Gross profit
Equity income
Operating expenses
154,440
(1,540,000)
(5,500,000) (1,320,000) Cash
2,420,000
770,000 Accounts receivable
Inventory
(550,000) Equity investment
Net income
1,034,440
220,000 Property, plant and equipment, net
$550,000 $110,000
1,034,000
1,320,000
275,000
605,000
1,267,200
3,080,000
990,000
Statement of retained earnings:
$ 7,521,200 $1,980,000
Beginning retained earnings:
Net income
Dividends
Ending retained earnings
$2,741,200
1,926,760 550,000 Liabilities and stockholders' equity
1,034,440 220,000 Current liabilities
(220,000) (55,000) Long-term liabilities
$715,000 Common stock
1,100,000 440,000
2,200,000 550,000
220,000
110,000
APIC
990,000
165,000
Retained earnings
2,741,200
715,000
$7,251,200 $1,980,000
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