On January 1, 2016, Parent purchased 100% of the common stock of Sub for $1,600,000 cash. Book value of Sub's equity at 1/1/16 is $ 850,000.

On January 1, 2016, Sub’s inventory, FIFO is used, was worth $350,000 more than book value. The inventory was sold in 2016. Building, which was worth $150,000 less than book value, had a remaining life of 10 years, and straight-line depreciation is used. An unrecorded patent with a fair value of $400,000 had 5 years remaining life on 1/1/16. The $500,000 face bond payable was initially issued when the market rate was 6% and pays coupon interest of 8% annually on 12/31. On 1/1/16, 20 years were left on the bond. Also, on 1/1/16, the bond’s market rate of interest was 5%. The remaining excess is allocated to goodwill.

Sub’s income and dividends for 2016 and 2017

	2016	2017
Net Income	$400,000	$550,000
Dividends	60,000	70,000

1. Prepare amortization schedules for the interest on BV of bond and for the new bond value amortization.

2. Prepare the roll forward charts for 2016 and 2017.

Interest on BV of Bond

Date	Interest Exp	Cash	Disct/Prem Amort	Balance
1/1/16

New bond value amortization

Date	Interest Exp	Cash	Disct/Prem Amort	Balance
1/1/16

Roll Forward Charts

1/1/16				12/31/16
BVE

1/1/17				12/31/17
BVE

Answer rating: 100% (QA)

1 Interest on BV of bond 2016 500000 x 6 30000 2017 500000 x 5 25000 New bond val... View the full answer