Question

In: Accounting

Assume that a Parent company acquires an 80% interest in its Subsidiary on January 1, 2020....

Assume that a Parent company acquires an 80% interest in its Subsidiary on January 1, 2020. On January 1, 2020, the book value of net assets and the fair value of the identifiable net assets equaled the book value of identifiable net assets (i.e. there was no AAP or Goodwill). The parent uses the equity method to account for its investment in the subsidiary.

On December 31, 2021, the Subsidiary company issued $1,000,000 (face) 6 percent, five-year bonds to an unaffiliated company for $1,085,379. The bonds pay interest annually on December 31, and the bond premium is amortized using the straight-line method. This results in annual bond-payable premium amortization equal to $17,076 per year.

On December 31, 2023, the Parent paid $974,229 to purchase all of the outstanding Subsidiary company bonds. The bond discount is amortized using the straight-line method, which results in annual bond-investment discount amortization equal to $8,590 per year.

The Parent and the Subsidiary report the following financial statements for the year ended December 31, 2024:

Income Statement
Parent Subsidiary
Sales $1,100,000 $800,000
Cost of goods sold -440,000 -450,000
Gross Profit 660,000 350,000
Income (loss) from subsidiary 119,995
Bond interest income 68,590
Bond interest expense -42,924
Operating expenses -230,000 -125,000
Net income $618,585 $182,076
Statement of Retained Earnings
Parent Subsidiary
BOY Retained Earnings $4,000,000 $450,000
Net income 618,585 182,076
Dividends -200,000 -25,000
EOY Retained Earnings $4,418,585 $607,076
Balance Sheet
Parent Subsidiary
Assets:
Cash $1,750,000 $800,000
Accounts receivable 800,000 750,000
Inventory 1,200,000 250,000
Equity Investment 2,095,393
Investment in subsidiary 982,819
PPE, net 14,046,480 4,677,227
$20,874,692 $6,477,227
Liabilities and Stockholders’ Equity:
Accounts payable $1,600,000 $838,000
Current Liabilities 2,200,000 1,100,000
Bonds payable 1,034,152
Long-term Liabilities 2,226,100 950,000
Common Stock 1,162,000 398,000
APIC 9,268,007 1,550,000
Retained Earnings 4,418,585 607,076
$20,874,692 $6,477,227

Required

Provide the consolidation entries worksheet for the year ended December 31, 2024.

Account Debit Credit
[C] Income (loss) from subsidiary Answer Answer
AnswerDividendsIncome attributable to noncontrolling interestInterest expenseInterest incomeNoncontrolling interestsRetained earnings Answer Answer
AnswerDividendsIncome attributable to noncontrolling interestInterest expenseInterest incomeNoncontrolling interestsRetained earnings Answer Answer
Equity investment Answer Answer
Noncontrolling interest Answer Answer
[E] Common stock Answer Answer
APIC Answer Answer
AnswerDividendsIncome attributable to noncontrolling interestInterest expenseInterest incomeNoncontrolling interestsRetained earnings Answer Answer
Equity investment Answer Answer
AnswerDividendsIncome attributable to noncontrolling interestInterest expenseInterest incomeNoncontrolling interestsRetained earnings Answer Answer
[Ibond] Bond payable (net) Answer Answer
AnswerDividendsIncome attributable to noncontrolling interestInterest expenseInterest incomeNoncontrolling interestsRetained earnings Answer Answer
Equity investment Answer Answer
Investment in bonds (net) Answer Answer
AnswerDividendsIncome attributable to noncontrolling interestInterest expenseInterest incomeNoncontrolling interestsRetained earnings Answer Answer

If it says "Answer" in the box that is the question/missing data. If it says Answer with a bunch of words after it those are the choices from the drop down menu. (For example the journal entries some of the descriptions are missing along with the debit/credit amount)

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