Please Answer Parts e and f.

Prepare consolidation spreadsheet for intercompany sale of equipment-Cost method Assume that a parent company acquired a subsidiary on January 1, 2012 for $922,000. The purchase price was $389,000 in excess of the book value of the subsidiary's Stockholders' Equity on the acquisition date. On the acquisition date, the subsidiary's stockholders equity was comprised of $390,000 of no-par common stock and $143,000 of retained earnings. The Acquisition Accounting Premium (AAP) was assigned as follows: an increase of $43,000 in accounts receivable that were entirely collected during the year after acquisition, an increase of $65,000 for property, plant and equipment that has 10 years of remaining useful life, $134,000 for an unrecorded patent with an 8-year remaining life and $147,000 for goodwill. All amortizable components of the AAP are amortized using the straight-line method. On January 1, 2014, the parent sold Equipment to the subsidiary for a cash price of $125,700. The parent had acquired the equipment at a cost of $121,800 and depreciated the equipment over its 12-year useful life using the straight- line method (no salvage value). The parent had depreciated the equipment for 2 years at the time of sale. The subsidiary retained the depreciation policy of the parent and depreciates the equipment over its remaining 10-year useful life. Following are financial statements of the parent and its subsidiary as of December 31, 2016. The parent uses the cost method of pre-consolidation investment bookkeeping. Parent Subsidiary Parent Subsidiary Income statement Balance sheet Sales $598,000 Assets (364,000) Cash 234,000 Accounts receivable $78,000 $117,000 156,000 117,000 364,000 182,000 Cost of goods sold Gross profit Deprec. & amort. Expense Operating expenses Interest expense Total expenses Income (loss) from subsidiary $1,300,000 (715,000) 585,000 (39,000) (390,000) (19,500) (448,500) 45,500 $182,000 (26,000) Inventory (104,000) Equity investment (6,500) Property, plant & equipment (136,500) Other assets 922,000 442,000 169,000 312,000 286,000 $975,000 Total assets 2,170,000 Net income $97,500 Liabilities and stockholders' equity Accounts payable Accrued liabilities Statement of retained earnings BOY retained earnings $715,000 Net income 182,000 $325,000 32,500 195,000 870,000 $325,000 Notes payable 97,500 Common stock (45,500) Retained earnings $377,000 Total liabilities and equity $70,200 59,800 78,000 390,000 377,000 $975,000 Dividends (149,500) 747,500 Ending retained earnings $747,500 2,170,000 e. Prepare the consolidation entries for the year ended December 31, 2016. Consolidation Journal Description Debit Credit [AD]] Equity investment - BOY Retained earnings-Parent [C] Income (loss) from subsidiary Dividends [E] BOY Common stock (Subsidiary) BOY Retained earnings-Subsidiary Equity investment [A] PPE, net Patent Goodwill [D] Equity investment Deprec. & amort. expense PPE, net . Patent A [lgain] Equity investment PPE, net [Idep] PPE, net Deprec. & amort. expense . f. Prepare the consolidation spreadsheet for the year ended December 31, 2016. Use negative signs with your answers in the Consolidated column for: Cost of goods sold, all expenses (inc. Total expenses) and Dividends. Consolidation Worksheet Parent Subsidiary Debit Credit Consolidated Income statement Sales $1,300,000 $598,000 $ Cost of goods sold (715,000) (364,000) Gross profit 585,000 234,000 Deprec. & amort. expense (39,000) (26,000) [D] [ldep] Operating expenses (390,000) (104,000) Interest expense (19,500) (6,500) Total Expenses (448,500) (136,500) Income (loss) from subsidiary 45,500 [C] Net income $182,000 $97,500 $ Retained earnings statement: BOY retained earnings $715,000 $325,000 [E] Net income 182,000 Dividends (149,500) (45,500) [C] Ending retained earnings $747,500 $377,000 $ Balance sheet: [AD]] $ 97,500 Assets $ Cash Accounts receivable Inventory Equity investment $117,000 156,000 364,000 922,000 $78,000 117,000 182,000 [AD] [lgain] [A] [ldep] [E] [A] [D] [lgain] PPE, net 442,000 312,000 169,000 286,000 Other assets Patent Goodwill [D] [A] [A] 2,170,000 $975,000 $ $ Total assets Liabilities & stockholders' equity Accounts payable Accrued liabilities Notes payable Common stock EOY Retained earnings Total liabilities and equity $325,000 32,500 195,000 $70,200 59,800 78,000 390,000 377,000 $975,000 [E] 870,000 747,500 $2,170,000 $ $