On January 1, 2020, Parent Company purchased 80% of the common stock of Subsidiary Company for $320,000.· On this date, Subsidiary had common stock, other paid-in capital, and retained earnings of $40,000, $120,000, and $190,000, respectively.· Net income and dividends for Subsidiary Company were $50,000 and $10,000, respectively.· Parent Company has used the simple equity method for recording the Subsidiary income and dividends.· On January 1, 2020, the only tangible assets of Subsidiary that were undervalued were inventory and equipment. Inventory was worth $5,000 more than cost. Equipment, which was worth $15,000 more than book value, has a remaining life of 5 years, and straight-line depreciation is used. Any remaining excess is goodwill.The following trial balances of the two companies are prepared on December 31, 2020.d. Prepare the consolidated worksheet.e. Prepare the 2020 consolidated income statement and balance sheet. ParentSubsidiaryInvestment in Sub352,000Current Assets132,000180,000Inventory60,00040,000Equipment350,000300,000Accumulated Depreciation(120,000)(50,000)GoodwillBond Payable(134,000)(80,000)CS-Par(100,000)PIC-Рar(200,000)RE-Par(200,000)CS-Sub(40,000)PIC-Sub(120,000)RE-Sub(190,000)Sales(550,000)(400,000)Expense450,000350,000Depreciation ExpenseSub Income(40,000)Dividend Declared - Sub10,000Totals Consolidated WorksheetTrial BalanceEliminations & AdjustmentsConsolidatedConsolidatedParentSubsidiaryKeyDebitCreditKeyNCIControlling REI/SB/SInvestment in Sub352,000Current Assets132,000180,000InventoryEquipmentAccumulated Depreciation60,00040,000350,000300,000-120,000-50.000GoodwillBond Payable-134.000-80,000CS-Par-100,000PIC-Par-200,000RE-Par-200.000CS-Sub-40,000PIC-Sub-120,000RE-Sub-190,000Sales-550,000-400,000ExpenseDepreciation ExpenseSub Income450,000350,000-40,000Dividend Declared - Sub10,000Consolidated N/ITo NCIBalance to Controlling InterestTotal NCIControlling Retained Earnings

Name: On January 1, 2020, Parent Company purchased 80% of the common stock o
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Description: On January 1, 2020, Parent Company purchased 80% of the common stock of Subsidiary Company for $320,000.· On this date, Subsidiary had common stock, other paid-in capital, and retained earnings of $40,000, $120,000, and $190,000, respectively.·

Consolidated financial statements are a set of financial statements prepared for a group company…

Answered: On January 1, 2020, Parent Company…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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On January 1, 2020, Parent Company purchased 80% of the common stock of Subsidiary Company for $320,000.

· On this date, Subsidiary had common stock, other paid-in capital, and retained earnings of $40,000, $120,000, and $190,000, respectively.

· Net income and dividends for Subsidiary Company were $50,000 and $10,000, respectively.

· Parent Company has used the simple equity method for recording the Subsidiary income and dividends.

· On January 1, 2020, the only tangible assets of Subsidiary that were undervalued were inventory and equipment. Inventory was worth $5,000 more than cost. Equipment, which was worth $15,000 more than book value, has a remaining life of 5 years, and straight-line depreciation is used. Any remaining excess is goodwill.

The following trial balances of the two companies are prepared on December 31, 2020.

d. Prepare the consolidated worksheet.

e. Prepare the 2020 consolidated income statement and balance sheet.

Parent
Subsidiary
Investment in Sub
352,000
Current Assets
132,000
180,000
Inventory
60,000
40,000
Equipment
350,000
300,000
Accumulated Depreciation
(120,000)
(50,000)
Goodwill
Bond Payable
(134,000)
(80,000)
CS-Par
(100,000)
PIC-Рar
(200,000)
RE-Par
(200,000)
CS-Sub
(40,000)
PIC-Sub
(120,000)
RE-Sub
(190,000)
Sales
(550,000)
(400,000)
Expense
450,000
350,000
Depreciation Expense
Sub Income
(40,000)
Dividend Declared - Sub
10,000
Totals

Consolidated Worksheet
Trial Balance
Eliminations & Adjustments
Consolidated
Consolidated
Parent
Subsidiary
Key
Debit
Credit
Key
NCI
Controlling RE
I/S
B/S
Investment in Sub
352,000
Current Assets
132,000
180,000
Inventory
Equipment
Accumulated Depreciation
60,000
40,000
350,000
300,000
-120,000
-50.000
Goodwill
Bond Payable
-134.000
-80,000
CS-Par
-100,000
PIC-Par
-200,000
RE-Par
-200.000
CS-Sub
-40,000
PIC-Sub
-120,000
RE-Sub
-190,000
Sales
-550,000
-400,000
Expense
Depreciation Expense
Sub Income
450,000
350,000
-40,000
Dividend Declared - Sub
10,000
Consolidated N/I
To NCI
Balance to Controlling Interest
Total NCI
Controlling Retained Earnings

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