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Consolidation on date of acquisition - Equity method with noncontrolling interest and AAP Assume that a...

Consolidation on date of acquisition - Equity method with noncontrolling interest and AAP
Assume that a parent company acquires an 80% interest in its subsidiary for a purchase price of $620,800. The excess of the total fair value of the controlling and noncontrolling interests over the book value of the subsidiary's Stockholders' Equity is assigned to a building (in PPE, net) that the parent believes is worth $50,000 more than its book value, an: unrecorded Patent that the parent valued at $100,000, and Goodwill of $150,000, 80% of which is allocated to the parent. The parent and the subsidiary report the balance sheets on the acquisition date in b. below:

a. Prepare the consolidation entries on the acquisition date.

Consolidation Worksheet
Description Debit Credit
[E] Common stock Answer Answer
APIC Answer Answer
AnswerPPE, netPatentGoodwillEquity investmentCommon stockAPICRetained earningsNoncontrolling interest Answer Answer
Equity investment Answer Answer
AnswerPPE, netPatentGoodwillEquity investmentCommon stockAPICRetained earningsNoncontrolling interest Answer Answer
[A] PPE, net Answer Answer
Patent Answer Answer
AnswerPPE, netPatentGoodwillEquity investmentCommon stockAPICRetained earningsNoncontrolling interest Answer Answer
Equity investment Answer Answer
AnswerPPE, netPatentGoodwillEquity investmentCommon stockAPICRetained earningsNoncontrolling interest Answer Answer

b. Prepare the consolidation spreadsheet on the acquisition date.

Elimination Entries
Parent Subsidiary Dr Cr Consolidated
Cash $460,378 $107,576 Answer
Accounts receivable 362,880 165,648 Answer
Inventory 549,990 212,772 Answer
Equity investment 620,800 Answer

[E]

Answer
Answer [A]
Patent [A] Answer Answer
Goodwill [A] Answer Answer
PPE, net 2,645,622 393,652 [A] Answer Answer
Total Assets $4,639,670 $879,648 Answer
Current liabilities $407,390 $165,648 Answer
Long-term liabilities 2,000,000 238,000 Answer
Common stock 463,523 47,600 [E] Answer Answer
APIC 344,453 59,500 [E] Answer Answer
Noncontrolling interest Answer

[E]

Answer
Answer [A]
Retained earnings 1,424,304 368,900 [E] Answer Answer
Total Liabilities and Equity $4,639,670 $879,648 Answer Answer Answer

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