Determining ending consolidated balances in the second year following the acquisition-Cost method Assume a parent company...

Transcribed Image Text:

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 $2,186,000. The purchase price was $1,066,200 in excess of the subsidiary's $1,119,800 book value of Stockholders' Equity on the acquisition date. Of this excess purchase price, $602,000 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: Parent Subsidiary Parent Subsidiary Income statement Sales Balance sheet Cost of goods sold Gross profit Equity income Operating expenses $8,318,750 $1,900,000 Assets (5,989,500) (1,089,000) Cash 2,329,250 37,400 (1,247,840) $1,567,280 $468,600 811,000 Accounts receivable Inventory Net income $1,118,810 (556,900) Equity investment $254,100 Property, plant & equipment, net 2,462,900 421,300 3,476,850 540,650 2,186,000 Statement of retained earnings 17,189,920 1,000,450 $26,882,950 $2,431,000 BOY retained earnings 5,801,070 937,750 Liabilities and stockholders' equity Net income 1,118,810 254,100 Accounts payable $1,217,920 $173,030 Dividends (262,570) (37,400) Accrued liabilities 1,447,270 226,270 Ending retained earnings $6,657,310 $1,154,450 Long-term liabilities 10,587,500 605,000 Common stock 1,025,060 121,000 APIC Retained earnings 5,947,890 151,250 6,657,310 1,154,450 $26,882,950 $2,431,000 At what amount will the following accounts appear on the consolidated financial statements? Do not use negative signs with any of your answers. a. Sales $ 10,218,750 b. Investment income $ 0 c. Operating expenses $ 1,864,940 d. Inventories $ 4,017,500 e. Equity investment $ 0 f. Property, plant & equipment, net $ 18,671,970 g. Goodwill $ 464,200 $ 1,025,060 h. Common stock i. Retained earnings $ 0 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 $2,186,000. The purchase price was $1,066,200 in excess of the subsidiary's $1,119,800 book value of Stockholders' Equity on the acquisition date. Of this excess purchase price, $602,000 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: Parent Subsidiary Parent Subsidiary Income statement Sales Balance sheet Cost of goods sold Gross profit Equity income Operating expenses $8,318,750 $1,900,000 Assets (5,989,500) (1,089,000) Cash 2,329,250 37,400 (1,247,840) $1,567,280 $468,600 811,000 Accounts receivable Inventory Net income $1,118,810 (556,900) Equity investment $254,100 Property, plant & equipment, net 2,462,900 421,300 3,476,850 540,650 2,186,000 Statement of retained earnings 17,189,920 1,000,450 $26,882,950 $2,431,000 BOY retained earnings 5,801,070 937,750 Liabilities and stockholders' equity Net income 1,118,810 254,100 Accounts payable $1,217,920 $173,030 Dividends (262,570) (37,400) Accrued liabilities 1,447,270 226,270 Ending retained earnings $6,657,310 $1,154,450 Long-term liabilities 10,587,500 605,000 Common stock 1,025,060 121,000 APIC Retained earnings 5,947,890 151,250 6,657,310 1,154,450 $26,882,950 $2,431,000 At what amount will the following accounts appear on the consolidated financial statements? Do not use negative signs with any of your answers. a. Sales $ 10,218,750 b. Investment income $ 0 c. Operating expenses $ 1,864,940 d. Inventories $ 4,017,500 e. Equity investment $ 0 f. Property, plant & equipment, net $ 18,671,970 g. Goodwill $ 464,200 $ 1,025,060 h. Common stock i. Retained earnings $ 0

Answer rating: 100% (QA)

To determine the amounts that will appear on the consolidated financial statements we need to consider the parent companys financial statements and th... View the full answer