Assume that a parent company acquired a subsidiary on January 1, 2013. The purchase price was $500,000
Question:
The AAP assets with a definite useful life have been amortized as part of the parent's equity method accounting. The Goodwill asset has been tested annually for impairment, and has not been found to be impaired.
Assume that the parent company sells inventory to its wholly owned subsidiary. The subsidiary, ultimately, sells the inventory to customers outside of the consolidated group. You have compiled the following data for the years ending 2015 and 2016:
The inventory not remaining at the end of the year has been sold to unaffiliated entities outside of the consolidated group. The parent uses the equity method to account for its Equity Investment.
The financial statements of the parent and its subsidiary for the year ended December 31, 2016, follow in part d. below.
a. Show the computation to yield the pre-consolidation $67,837 Income loss from subsidiary reported by the parent during 2016.
b. Show the computation to yield the Equity Investment balance of $957,989 reported by the parent at December 31, 2016. Hint: Use negative signs with answers when appropriate.
c. Prepare the consolidation entries for the year ended December 31, 2016.
d. Prepare the consolidation spreadsheet for the year ended December 31, 2016. Hint: Use negative signs with answers when appropriate.
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
Step by Step Answer:
Financial Accounting
ISBN: 9781618533111
6th Edition
Authors: Michelle L. Hanlon, Robert P. Magee, Glenn M. Pfeiffer, Thomas R. Dyckman