Parent Company acquired 60% ownership of Sub Company on January 1, 2011, for $150,000. On that date, Sub reported retained earnings of $100,000 and had $80,000 of common stock outstanding. The parent has used the equity method of accounting for its investment in Sub. On the date of combination, the fair value of Sub's depreciable assets was $60,000 more than the book value. The accumulated depreciation on these assets was $50,000 on the acquisition date. The remaining life of the depreciable assets is ten years. Also, according to the data taken from the ledgers of these companies at the end of 2015, the Parent owed $5,000 to Sub Company. The trial balance data for the two companies on December 31, 2015, are as shown on the left.

Requirement:

1. Prepare all journal entries that Parent recorded in its ledger during 2015 relating to its investment in Sub.

2. Prepare all consolidation journal entries needed to prepare consolidated statements for 2015.

Answer rating: 100% (QA)

1 Parent Company Investment in Sub Company January 1 2011 Cash 150000 Investment in Sub Company 1... View the full answer