Determining ending consolidated balances in the second year following the acquisition—Cost methodAssume a parent company acquired a subsidiary on January 1, 2015, for $2,236,000. The purchase price was $1,116,200 in excess of the subsidiary’s $1,119,800 book value of Stockholders’ Equity on the acquisition date. Of this excess purchase price, $652,000 was assigned to Property, plant and equipment with a remaining economic useful life of 10 years, and $464,200 was assigned to Goodwill. On the acquisition date, the subsidiary reported retained earnings equal to $847,550. The parent uses the cost method of pre-consolidation Equity investment bookkeeping. The financial statements of the parent and its subsidiary for the year ended December 31, 2016, are as follows: Income statementSalesCost of goods soldGross profitEquity incomeOperating expensesNet incomeStatement of retained earningsBOY retained earningsNet incomeDividendsEnding retained earningsParent Subsidiary$8,318,750 $1,910,000 Assets(5.989,500) (1,089,000) Cash2,329,250 821,000 Accounts receivable37,400- Inventory(1,247,840) (566,900) Equity investment$1,118,810$254,100 Property, plant & equipment, net5,801,070937,750 Liabilities and stockholders' equity254,100 Accounts payable1,118,810(262,570) (37,400) Accrued liabilities$6,657,310 $1,154,450Long-term liabilitiesCommon stockAPICRetained earnings$e. Equity investment$f. Property, plant & equipment, net $g. Goodwill$h. Common stock$i. Retained earnings$Balance sheet00000At what amount will the following accounts appear on the consolidated financial statements?Do not use negative signs with any of your answers.a. Sales$b. Investment income$c. Operating expenses$d. Inventories0000Parent Subsidiary$1,567,280 $468,6002,462,900421,3003,526,850540,6502,236,00017,189,920 1,000,450$26,982,950 $2,431,000$1,217,9201,447,270$173,030226,27010,587,500605,0001,075,060121,0005,997,890 151,2506,657,310 1,154,450$26,982,950 $2,431,000

For accounting purposes, when one company (parent co.) acquires another company (subsidiary co.),…

Answered: Determining ending consolidated…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Concept explainers

Question

100%

Determining ending consolidated balances in the second year following the acquisition—Cost method
Assume a parent company acquired a subsidiary on January 1, 2015, for $2,236,000. The purchase price was $1,116,200 in excess of the subsidiary’s $1,119,800 book value of Stockholders’ Equity on the acquisition date. Of this excess purchase price, $652,000 was assigned to Property, plant and equipment with a remaining economic useful life of 10 years, and $464,200 was assigned to Goodwill. On the acquisition date, the subsidiary reported retained earnings equal to $847,550. The parent uses the cost method of pre-consolidation Equity investment bookkeeping. The financial statements of the parent and its subsidiary for the year ended December 31, 2016, are as follows:

Income statement
Sales
Cost of goods sold
Gross profit
Equity income
Operating expenses
Net income
Statement of retained earnings
BOY retained earnings
Net income
Dividends
Ending retained earnings
Parent Subsidiary
$8,318,750 $1,910,000 Assets
(5.989,500) (1,089,000) Cash
2,329,250 821,000 Accounts receivable
37,400
- Inventory
(1,247,840) (566,900) Equity investment
$1,118,810
$254,100 Property, plant & equipment, net
5,801,070
937,750 Liabilities and stockholders' equity
254,100 Accounts payable
1,118,810
(262,570) (37,400) Accrued liabilities
$6,657,310 $1,154,450
Long-term liabilities
Common stock
APIC
Retained earnings
$
e. Equity investment
$
f. Property, plant & equipment, net $
g. Goodwill
$
h. Common stock
$
i. Retained earnings
$
Balance sheet
0
0
0
0
0
At what amount will the following accounts appear on the consolidated financial statements?
Do not use negative signs with any of your answers.
a. Sales
$
b. Investment income
$
c. Operating expenses
$
d. Inventories
0
0
0
0
Parent Subsidiary
$1,567,280 $468,600
2,462,900
421,300
3,526,850
540,650
2,236,000
17,189,920 1,000,450
$26,982,950 $2,431,000
$1,217,920
1,447,270
$173,030
226,270
10,587,500
605,000
1,075,060
121,000
5,997,890 151,250
6,657,310 1,154,450
$26,982,950 $2,431,000

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions