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Consolidation on date of acquisition - Noncontrolling interest and AAP Assume a parent company acquires a 75% interest in its subsidiary for a purchase price of $1,097,250. The excess of the total fair value of the controlling and noncontrolling interests over the book value of the subsidiarys Stockholders Equity is assigned to a building (in PPE, net) that is worth $104,500 more than its book value, an unrecorded patent with a fair value of $171,000, and Goodwill of $294,500. There is no control premium, so goodwill is assigned proportionally to the controlling and noncontrolling interests. The parent and the subsidiary report the following pre-consolidation balance sheets on the acquisition date: Parent Subsidiary Parent Subsidiary Cash $855,000 $190,000 Current liabilities $760,000 $299,250 Accounts receivable 742,900 313,500 Long-term liabilities 2,850,000 475,000 Inventory 1,045,000 403,750 Common stock 855,000 85,500 Equity investment 1,097,250 APIC 665,000 114,000 Property, plant, and equipment(PPE), net 3,800,000 760,000 Retained earnings 2,410,150 693,500 Total assets $7,540,150 1,667,250 Total liabilities and equity $7,540,150 $1,667,250 a. Prepare the consolidation entries on the acquisition date. Consolidation Worksheet Description Debit Credit [E] Common stock Answer 0 Answer 0 APIC Answer 0 Answer 0 Answer Answer 0 Answer 0 Equity investment Answer 0 Answer 0 Answer Answer 0 Answer 0 [A] PPE, net Answer 0 Answer 0 Patent Answer 0 Answer 0 Answer Answer 0 Answer 0 Equity investment Answer 0 Answer 0 Answer Answer 0 Answer 0 b. Prepare the consolidation spreadsheet on the acquisition date. Elimination Entries Parent Subsidiary Dr Cr Consolidated Cash $855,000 $190,000 Answer 0 Accounts receivable 742,900 313,500 Answer 0 Inventory 1,045,000 403,750 Answer 0 Equity investment 1,097,250 Answer 0 [E] Answer 0 Answer 0 [A] PPE, net 3,800,000 760,000 [A] Answer 0 Answer 0 Patent [A] Answer 0 Answer 0 Goodwill [A] Answer 0 Answer 0 Total Assets $7,540,150 $1,667,250 Answer 0 Current liabilities $760,000 $299,250 Answer 0 Long-term liabilities 2,850,000 475,000 Answer 0 Common stock 855,000 85,500 [E] Answer 0 Answer 0 APIC 665,000 114,000 [E] Answer 0 Answer 0 Noncontrolling interest Answer 0 [E] Answer 0 Answer 0 [A] Retained earnings 2,410,150 693,500 [E] Answer 0 Answer 0 Total Liabilities and Equity $7,540,150 $1,667,250 Answer 0 Answer 0 Answer 0

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