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  3. on january 1, 2020, parent company purchased 70% o

On January 1, 2020, Parent Company purchased 70% of the common stock of Subsidiary Company...

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Accounting

  1. On January 1, 2020, Parent Company purchased 70% of the common stock of Subsidiary Company for $316,000. On this date, Subsidiary had common stock, other paid-in capital, and retained earnings of $40,000, $120,000, and $190,000, respectively. Net income and dividends for 2 years for Subsidiary Company were as follows:

2020 2021
Net income $70,000 $100,000
Dividends 5,000 15,000

On January 1, 2020, the only tangible assets of Subsidiary that were undervalued were inventory and building. Inventory, for which FIFO is used, was worth $3,000 more than cost. The inventory was sold in 2020. The building, which was worth $24,000 more than its book value, has a remaining life of 8 years, and straight-line depreciation is used. Any remaining excess is goodwill.

Prepare the necessary data alignment entries (in journal form) for the consolidating worksheet for December 31, 2020, and December 31, 2021, assuming that Parent records its investment in the Subsidiary using the cost method. If date alignment entries are not required, give rationale.

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