Determining ending consolidated balances in the second year following the acquis

Question

Determining ending consolidated balances in the second year following the acquisition—Cost method
Assume a parent company acquired a subsidiary on January 1, 2015, for $2,086,000. The purchase price was $966,200 in excess of the subsidiary’s $1,119,800 book value of Stockholders’ Equity on the acquisition date. Of this excess purchase price, $502,000 was assigned to Property, plant and equipment with a remaining economic useful life of 10 years, and $464,200 was assigned to Goodwill. On the acquisition date, the subsidiary reported retained earnings equal to $847,550. The parent uses the cost method of pre-consolidation Equity investment bookkeeping. The financial statements of the parent and its subsidiary for the year ended December 31, 2016, are as follows:

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

Do not use negative signs with any of your answers.

Parent Subsidiary Parent Subsidiary Income statement Sales Cost of goods sold Gross profit Equity income Operating expenses Balance sheet $8,318,750 $1,890,000 Assets (5,989,500) (1,089,000) Cash $1,567,280 $468,600 421,300 540,650 2,462,900 3,376,850 2,086,000 2,329,250 801,000 Accounts receivable 37,400 (1,247,840) (546,900) Equity investment $1,118,810 Inventory $254,100 Property, Net income plant & equipment 17,189,920 1,000,450 Statement of retained $26,682,950 $2,431,000 earnings Liabilities and stockholders' BOY retained earnings 5,801,070937,750 equity 1,118,810 254,100 Accounts payable (262,570) (37,400) Accrued liabilities $6,657,310 $1,154,450 Long-term liabilities $1,217,920 $173,030 226,270 605,000 121,000 151,250 6,657,310 1,154,450 $26,682,950 $2,431,000 Net income Dividends 1,447,270 10,587,500 925,060 5,847,890 Ending retained earnings Common stock APIC Retained earnings

Explanation / Answer

i.e; 8318750+1890000= 10208750.

i.e; 262570+37400=299970.

i.e; 1247840-546900=700940.

i.e; 33760850-540650=33220200.

ie; 2086000 since the subsidary company do not have any euity investment, only the value of parent company is taken.

ie; 17189920-1000450=16189470.

ie; 925060-121000=794060.

ie; 6657310-1154450= 5502860.

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