Please see belowAssume that, on January 1, 2009, a parent company acquired an 80% interest in its subsidiary. The total fair value of the controlling and noncontrolling interests was $500,000 over the book value of the subsidiary’s Stockholders’ Equity on the acquisition date. The parent assigned the excess to the following [A] assets:[A] Asset Initial Fair Value Useful Life (years)[A] AssetInitialFair ValueUsefulLife (years)Property, plant and equipment (PPE), net$100,00010Customer list150,00010Goodwill250,000Indefinite $500,000 80% of the Goodwill is allocated to the parent. The parent and the subsidiary report the following financial statements at December 31, 2013: ParentSubsidiary ParentSubsidiaryIncome statement: Balance sheet:Sales$7,330,000$1,870,500 AssetsCost of goods sold(5,131,000)(1,122,300) Cash$411,313$131,511Gross profit2,199,000748,200 Accounts receivable938,240433,956Income (loss) from subsidiary189,496 Inventory1,422,020557,409Operating expenses(1,392,700)(486,330) Equity investment1,475,671 Net income$995,796261,870 Property, plant and equipment (PPE), net5,374,3561,280,669 $9,621,600$2,403,545Statement of retained earnings:BOY retained earnings$3,682,592$966,425 Liabilities and stockholders’ equity Net income995,796261,870 Current liabilities$1,053,321$433,956Dividends(199,159)(39,281) Long-term liabilities2,000,000500,000EOY retained earnings$4,479,229$1,189,014 Common stock1,198,455124,700 APIC890,595155,875 Retained earnings4,479,2291,189,014 $9,621,600$2,403,545 a. Disaggregate and document the activity for the 100% Acquisition Accounting Premium (AAP), the controlling interest AAP and the noncontrolling interest AAP.Note: Do not use negative signs with any of your answers below. Unamortized Unamortized Unamortized Unamortized Unamortized Unamortized AAP2009AAP2010AAP2011AAP2012AAP2013AAP 1/1/2009Amortization1/1/2010Amortization1/1/2011Amortization1/1/2012Amortization1/1/2013Amortization1/1/2014Property, plant and equipment (PPE), netAnswer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Customer listAnswer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer GoodwillAnswer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Parent:Property, plant and equipment (PPE), netAnswer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Customer listAnswer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer GoodwillAnswer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Subsidiary:Property, plant and equipment (PPE), netAnswer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Customer listAnswer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer GoodwillAnswer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer b. Calculate and organize the profits and losses on intercompany transactions and balances. DownstreamUpstreamJan. 1, 2013AnswerAnswer Answer Dec. 31, 2013AnswerAnswer Answer c. Compute the pre-consolidation Equity Investment account beginning and ending balances starting with the stockholders’ equity of the subsidiary.Equity investment at 1/1/13: Common stockAnswer APICAnswer Retained earningsAnswer AnswerAnswer Answer Equity investment at 12/31/13: Common stockAnswer APICAnswer Retained earningsAnswer AnswerAnswer Answer Consolidation subsequent to date of acquisition - Equity method with noncontrolling interest and AAPAssume that, on January 1, 2009, a parent company acquired an 80% interest in its subsidiary. The total fair value of the controlling and noncontrolling interests was $500,000over the book value of the subsidiary's Stockholders' Equity on the acquisition date. The parent assigned the excess to the following [A] assets:[A] Asset Initial Fair Value Useful Life (years)[A] AssetProperty, plant and equipment (PPE), netCustomer listGoodwillIncome statement:SalesCost of goods soldGross profitIncome (loss) from subsidiaryOperating expensesNet incomeInitial UsefulFair Value Life (years)$100,000150,000250,000$500,00080% of the Goodwill is allocated to the parent. The parent and the subsidiary report the following financial statements at December 31, 2013:Parent Subsidiary1010(1,392,700)$995,796IndefiniteBalance sheet:$7,330,000 $1,870,500 Assets(5,131,000) (1,122,300) Cash2,199,000189,496748,200 Accounts receivableInventory(486,330) Equity investment261,870 Property, plant and equipment (PPE), netParentSubsidiary$411,313 $131,511938,240 433,9561,422,020557,4091,475,6715,374,356 1,280,669$9,621,600 $2,403,545 Statement of retained earnings:BOY retained earningsNet incomeDividendsEOY retained earnings$3,682,592995,796(199,159) (39,281) Long-term liabilities$4,479,229 $1,189,014 Common stockAPICRetained earningsProperty, plant and equipment (PPE), netCustomer listGoodwilla. Disaggregate and document the activity for the 100% Acquisition Accounting Premium (AAP), the controlling interest AAP and the noncontrolling interest AAP.Note: Do not use negative signs with any of your answers below.UnamortizedAAP1/1/2009Parent:Property, plant and equipment (PPE), netCustomer listGoodwill$966,425 Liabilities and stockholders' equity261,870 Current liabilitiesSubsidiary:Property, plant and equipment (PPE), netCustomer list00000000002009Amortization00000000O O00UnamortizedAAP1/1/20100000O O O000O$1,053,321 $433,9562,000,000 500,0001,198,455 124,700890,595155,8754,479,229 1,189,014$9,621,600 $2,403,545002010Amortization0000000000UnamortizedAAP20111/1/2011 Amortization000000000000000000O O00UnamortizedAAP20121/1/2012 Amortization0000000O000000000000UnamortizedAAP20131/1/2013 Amortization 1/1/201UnamortAAP00000000000000OOO00000

Question

Please see belowAssume that, on January 1, 2009, a parent company acquired an 80% interest in its subsidiary. The total fair value of the controlling and noncontrolling interests was $500,000 over the book value of the subsidiary’s Stockholders’ Equity on the acquisition date. The parent assigned the excess to the following [A] assets:[A] Asset Initial Fair Value Useful Life (years)[A] AssetInitialFair ValueUsefulLife (years)Property, plant and equipment (PPE), net$100,00010Customer list150,00010Goodwill250,000Indefinite $500,000  80% of the Goodwill is allocated to the parent. The parent and the subsidiary report the following financial statements at December 31, 2013:  ParentSubsidiary  ParentSubsidiaryIncome statement: Balance sheet:Sales$7,330,000$1,870,500 AssetsCost of goods sold(5,131,000)(1,122,300) Cash$411,313$131,511Gross profit2,199,000748,200 Accounts receivable938,240433,956Income (loss) from subsidiary189,496  Inventory1,422,020557,409Operating expenses(1,392,700)(486,330) Equity investment1,475,671 Net income$995,796261,870 Property, plant and equipment (PPE), net5,374,3561,280,669   $9,621,600$2,403,545Statement of retained earnings:BOY retained earnings$3,682,592$966,425 Liabilities and stockholders’ equity  Net income995,796261,870 Current liabilities$1,053,321$433,956Dividends(199,159)(39,281) Long-term liabilities2,000,000500,000EOY retained earnings$4,479,229$1,189,014 Common stock1,198,455124,700  APIC890,595155,875  Retained earnings4,479,2291,189,014   $9,621,600$2,403,545 a. Disaggregate and document the activity for the 100% Acquisition Accounting Premium (AAP), the controlling interest AAP and the noncontrolling interest AAP.Note: Do not use negative signs with any of your answers below.  Unamortized Unamortized Unamortized Unamortized Unamortized Unamortized AAP2009AAP2010AAP2011AAP2012AAP2013AAP 1/1/2009Amortization1/1/2010Amortization1/1/2011Amortization1/1/2012Amortization1/1/2013Amortization1/1/2014Property, plant and equipment (PPE), netAnswer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Customer listAnswer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer GoodwillAnswer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer  Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Parent:Property, plant and equipment (PPE), netAnswer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Customer listAnswer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer GoodwillAnswer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer  Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Subsidiary:Property, plant and equipment (PPE), netAnswer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Customer listAnswer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer GoodwillAnswer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer  Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer b. Calculate and organize the profits and losses on intercompany transactions and balances. DownstreamUpstreamJan. 1, 2013AnswerAnswer Answer Dec. 31, 2013AnswerAnswer Answer c. Compute the pre-consolidation Equity Investment account beginning and ending balances starting with the stockholders’ equity of the subsidiary.Equity investment at 1/1/13: Common stockAnswer APICAnswer Retained earningsAnswer AnswerAnswer  Answer Equity investment at 12/31/13: Common stockAnswer APICAnswer Retained earningsAnswer AnswerAnswer  Answer Consolidation subsequent to date of acquisition - Equity method with noncontrolling interest and AAPAssume that, on January 1, 2009, a parent company acquired an 80% interest in its subsidiary. The total fair value of the controlling and noncontrolling interests was $500,000over the book value of the subsidiary's Stockholders' Equity on the acquisition date. The parent assigned the excess to the following [A] assets:[A] Asset Initial Fair Value Useful Life (years)[A] AssetProperty, plant and equipment (PPE), netCustomer listGoodwillIncome statement:SalesCost of goods soldGross profitIncome (loss) from subsidiaryOperating expensesNet incomeInitial UsefulFair Value Life (years)$100,000150,000250,000$500,00080% of the Goodwill is allocated to the parent. The parent and the subsidiary report the following financial statements at December 31, 2013:Parent Subsidiary1010(1,392,700)$995,796IndefiniteBalance sheet:$7,330,000 $1,870,500 Assets(5,131,000) (1,122,300) Cash2,199,000189,496748,200 Accounts receivableInventory(486,330) Equity investment261,870 Property, plant and equipment (PPE), netParentSubsidiary$411,313 $131,511938,240 433,9561,422,020557,4091,475,6715,374,356 1,280,669$9,621,600 $2,403,545 Statement of retained earnings:BOY retained earningsNet incomeDividendsEOY retained earnings$3,682,592995,796(199,159) (39,281) Long-term liabilities$4,479,229 $1,189,014 Common stockAPICRetained earningsProperty, plant and equipment (PPE), netCustomer listGoodwilla. Disaggregate and document the activity for the 100% Acquisition Accounting Premium (AAP), the controlling interest AAP and the noncontrolling interest AAP.Note: Do not use negative signs with any of your answers below.UnamortizedAAP1/1/2009Parent:Property, plant and equipment (PPE), netCustomer listGoodwill$966,425 Liabilities and stockholders' equity261,870 Current liabilitiesSubsidiary:Property, plant and equipment (PPE), netCustomer list00000000002009Amortization00000000O O00UnamortizedAAP1/1/20100000O O O000O$1,053,321 $433,9562,000,000 500,0001,198,455 124,700890,595155,8754,479,229 1,189,014$9,621,600 $2,403,545002010Amortization0000000000UnamortizedAAP20111/1/2011 Amortization000000000000000000O O00UnamortizedAAP20121/1/2012 Amortization0000000O000000000000UnamortizedAAP20131/1/2013 Amortization 1/1/201UnamortAAP00000000000000OOO00000

Accepted Answer

The subsidiary company refers to the concept when a business owns partially or some percentage of a…

[A] Asset	Initial Fair Value	Useful Life (years)
Property, plant and equipment (PPE), net	$100,000	10
Customer list	150,000	10
Goodwill	250,000	Indefinite
	$500,000

	Parent	Subsidiary			Parent	Subsidiary
Income statement:		Balance sheet:
Sales	$7,330,000	$1,870,500		Assets
Cost of goods sold	(5,131,000)	(1,122,300)		Cash	$411,313	$131,511
Gross profit	2,199,000	748,200		Accounts receivable	938,240	433,956
Income (loss) from subsidiary	189,496			Inventory	1,422,020	557,409
Operating expenses	(1,392,700)	(486,330)		Equity investment	1,475,671
Net income	$995,796	261,870		Property, plant and equipment (PPE), net	5,374,356	1,280,669
			$9,621,600	$2,403,545
Statement of retained earnings:
BOY retained earnings	$3,682,592	$966,425		Liabilities and stockholders’ equity
Net income	995,796	261,870		Current liabilities	$1,053,321	$433,956
Dividends	(199,159)	(39,281)		Long-term liabilities	2,000,000	500,000
EOY retained earnings	$4,479,229	$1,189,014		Common stock	1,198,455	124,700
		APIC	890,595	155,875
		Retained earnings	4,479,229	1,189,014
			$9,621,600	$2,403,545

	Unamortized		Unamortized		Unamortized		Unamortized		Unamortized		Unamortized
	AAP	2009	AAP	2010	AAP	2011	AAP	2012	AAP	2013	AAP
	1/1/2009	Amortization	1/1/2010	Amortization	1/1/2011	Amortization	1/1/2012	Amortization	1/1/2013	Amortization	1/1/2014
Property, plant and equipment (PPE), net	Answer	Answer	Answer	Answer	Answer	Answer	Answer	Answer	Answer	Answer	Answer
Customer list	Answer	Answer	Answer	Answer	Answer	Answer	Answer	Answer	Answer	Answer	Answer
Goodwill	Answer	Answer	Answer	Answer	Answer	Answer	Answer	Answer	Answer	Answer	Answer
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Parent:
Property, plant and equipment (PPE), net	Answer	Answer	Answer	Answer	Answer	Answer	Answer	Answer	Answer	Answer	Answer
Customer list	Answer	Answer	Answer	Answer	Answer	Answer	Answer	Answer	Answer	Answer	Answer
Goodwill	Answer	Answer	Answer	Answer	Answer	Answer	Answer	Answer	Answer	Answer	Answer
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Subsidiary:
Property, plant and equipment (PPE), net	Answer	Answer	Answer	Answer	Answer	Answer	Answer	Answer	Answer	Answer	Answer
Customer list	Answer	Answer	Answer	Answer	Answer	Answer	Answer	Answer	Answer	Answer	Answer
Goodwill	Answer	Answer	Answer	Answer	Answer	Answer	Answer	Answer	Answer	Answer	Answer
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	Downstream	Upstream
Jan. 1, 2013	Answer	Answer	Answer
Dec. 31, 2013	Answer	Answer	Answer

Equity investment at 1/1/13:
Common stock	Answer
APIC	Answer
Retained earnings	Answer
Answer	Answer
	Answer
Equity investment at 12/31/13:
Common stock	Answer
APIC	Answer
Retained earnings	Answer
Answer	Answer
	Answer