Pushdown Accounting Assume a parent company acquires its subsidiary by paying $1,700,000 for all of the outstanding voting shares of the investee. On the acquisition date, subsidiary's assets and liabilities have individual fair values that equal their book values, except for property equipment with a fair value greater than book value by $150,000 and license with a fair value greater than book value by $250,000. The parent and subsidiary have the following balance sheets immediately after the acquisition, but before any pushdown adjustments by the subsidiary: Parent   Parent Subsidiary Assets:     Cash & receivables $ 800,000 $ 350,000 Inventory 600,000 200,000 Property & equipment, net 2,300,000 1,025,000 Equity investment 1,700,000   Licenses - 275,000   $ 5,400,000 $ 1,850,000 Liabilities and stockholders' equity:     Current liabilities $ 400,000 $ 400,000 Other liabilities 300,000 - Note payable - 600,000 Common stock 1,670,000 100,000 APIC 1,430,000 200,000 Retained earnings 1,600,000 550,000   $ 5,400,000 $ 1,850,000 a. Compute the amount of goodwill implicit in the acquisition of the subsidiary. $Answer b. Assume the subsidiary elects to apply pushdown accounting immediately after the above financial statements were prepared. Provide the journal entries required for the subsidiary to apply pushdown accounting. Description Debit Credit Property & equipment, net Answer Answer Licenses Answer Answer Answer Answer Answer Answer Answer Answer To record AAP in subsidiary's standalone financial statements.     Answer Answer Answer Answer Answer Answer To reclassify subsidiary's retained earnings.       c. Prepare the consolidation entry or entries on the date of acquisition, assuming the subsidiary applied pushdown accounting. Description Debit Credit [E] Common stock Answer Answer   APIC Answer Answer   Answer Answer Answer   Answer Answer Answer   d. Prepare the consolidated balance sheet on the date of acquisition. Consolidated Balance Sheet Assets:     Cash & receivables   Answer Inventory   Answer Property & equipment, net   Answer Licenses   Answer Answer   Answer     Answer Liabilities and stockholders' equity: Current liabilities   Answer Other liabilities   Answer Note payable   Answer Common stock   Answer APIC   Answer Retained earnings   Answer     Answer PreviousSave AnswersNext