The AAP asset relating to undervalued PPE with a 15-year useful life has been depreciated as part of the parent’s equity method accounting. The financial statements of the parent and its subsidiary for the year ended December 31, 2016, are as follows: Parent Subsidiary Parent Subsidiary Income statement: Balance sheet: Sales $6,875,000 $1,500,000 Assets Cost of goods sold (4,950,000) (900,000) Cash $1,295,313 $386,500 Gross profit 1,925,000 600,000 Accounts receivable 1,760,000 348,000 Equity income 186,000 Inventory 2,667,500 447,000 Operating expenses (1,031,250) (390,000) Equity investment 1,875,500 Net income $1,079,750 $210,000 Property, plant and equipment (PPE), net 14,206,500 827,000 $21,804,813 $2,008,500 Statement of retained earnings: BOY retained earnings $4,639,750 $775,000 Liabilities and stockholders’ equity Net income 1,079,750 210,000 Accounts payable $1,006,500 $143,000 Dividends (217,000) (31,500) Accrued liabilities 1,196,250 187,000 Ending retained earnings $5,502,500 $953,500 Long-term liabilities 8,750,000 500,000 Common stock 640,563 100,000 APIC 4,709,000 125,000 Retained earnings 5,502,500 953,500 $21,804,813 $2,008,500 At what amount will the following accounts appear on the consolidated financial statements? Note: Do not use negative signs with your answers. a. Sales Answer b. Equity income Answer c. Operating expenses Answer d. Accounts receivable Answer e. Equity investment Answer f. Property plant and equipment (PPE) net Answer g. Goodwill Answer h. Common stock Answer i. Retained earnings Answer

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The AAP asset relating to undervalued PPE with a 15-year useful life has been depreciated as part of the parent’s equity method accounting. The financial statements of the parent and its subsidiary for the year ended December 31, 2016, are as follows:

	Parent	Subsidiary		Parent	Subsidiary
Income statement:			Balance sheet:
Sales	$6,875,000	$1,500,000	Assets
Cost of goods sold	(4,950,000)	(900,000)	Cash	$1,295,313	$386,500
Gross profit	1,925,000	600,000	Accounts receivable	1,760,000	348,000
Equity income	186,000		Inventory	2,667,500	447,000
Operating expenses	(1,031,250)	(390,000)	Equity investment	1,875,500
Net income	$1,079,750	$210,000	Property, plant and equipment (PPE), net	14,206,500	827,000
				$21,804,813	$2,008,500
Statement of retained earnings:
BOY retained earnings	$4,639,750	$775,000	Liabilities and stockholders’ equity
Net income	1,079,750	210,000	Accounts payable	$1,006,500	$143,000
Dividends	(217,000)	(31,500)	Accrued liabilities	1,196,250	187,000
Ending retained earnings	$5,502,500	$953,500	Long-term liabilities	8,750,000	500,000
			Common stock	640,563	100,000
			APIC	4,709,000	125,000
			Retained earnings	5,502,500	953,500
				$21,804,813	$2,008,500

At what amount will the following accounts appear on the consolidated financial statements?

Note: Do not use negative signs with your answers.

a.	Sales	Answer
b.	Equity income	Answer
c.	Operating expenses	Answer
d.	Accounts receivable	Answer
e.	Equity investment	Answer
f.	Property plant and equipment (PPE) net	Answer
g.	Goodwill	Answer
h.	Common stock	Answer
i.	Retained earnings	Answer

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