On January 1, 2021, Parent, Inc. acquired 100 percent of Subsidiary Company's common shares by exchanging 47,500 shares of its $1 par value common stock with a market value of $60 per share on the acquisition date. On the acquisition date, all the subsidiary's identifiable net assets had fair values equal to book value except for a building that was undervalued by $320,000, an unrecorded patent license with a fair value of $210,000, and an unrecorded customer list that had a fair value of $280,000. The subsidiary uses the straight-line method for depreciation and indicated the building has a remaining useful life of 16 years. It also estimated the patent and customer list had useful lives of 7 and 8 years, respectively, at the acquisition date. Finally, the parent has an account receivable from the subsidiary for $50,000 at December 31, 2021 for management services provided by the parent to the subsidiary throughout the year. The cost of these services to the parent was $40,000. Parent, Inc. is a large public company.

The year-end, December 31, 2021, adjusted trial balances of Parent Inc. and Subsidiary Company are on the attached consolidation worksheet.

 Prepare the following:

1. Journal entry to record the acquisition. 

2. Acquisition Accounting Premium (AAP) Schedule. 

3. Computation of the components that support the parent's year end Equity Investment and Equity Income balances on the adjusted trial balance at year end. 

4. All journal entries under the equity method that the parent company recorded during the year. 

5. Consolidation entries needed to prepare consolidated financial statements at year-end. 

6. Consolidation worksheet for the year ended.

Answer rating: 100% (QA)

Answer 1 Journal entry to record the acquisition Parent Inc Date Debit Credit 112021 Accounts Receivable 50000 112021 Buildings 320000 112021 Cash 288... View the full answer