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Parent Company acquired 100 percent of Subsidiary's outstanding stock for $20,662,500 cash on January 1, 2021. At the date of acquisition, Subsidiary's balance sheet was as follows. (Note: Debits are shown as positive, and credits are shown as negative.) Cash Receivables Inventory Land Equipment (net) Software Liabilities Common Stock Retained Earnings 527,250 1,168,500 2,123,250 1,282,500 3,206,250 4,488,750 (6,013,500) (4,987,500) (1,795,500) Certain assets and liabilities had fair values that differed from their book values. The fair values of these were as follows (note: this is not the difference between fair value and book value; this is the fair value): Land 1,140,000 Brand Name (indefinite life) 855,000 Software (2 year life) 5,913,750 IP R&D (10 year life) 4,275,000 Other relevant information: Parent's 1/1/2022 retained earnings balance (excluding the effect of any 2021 subsidiary transactions/income) was $13,252,500. The subsidiary had net income of $1,068,750 and paid no dividends in 2021. There are no intercompany payables/receivables between Parent and Subsidiary. The companies' 12/31/2022 trial balances are as follows: Required: Prepare an Excel workbook to consolidate Parent and Subsidiary's financial statements for 2022. The workbook should contain the following: Tab 1: The information contained on the previous page of these instructions, with the fair value allocation schedule completed. Tab 2: Calculation of the 12/31/2022 balance of the Investment in Subsidiary account (on Parent's books) using (1) the equity method, (2) the partial equity method, and (3) the initial value method. Also calculate Parent's 1/1/2022 retained earnings using each of these methods. Tab 2: A listing of all consolidation entries necessary under each of the respective methods (equity, partial equity, and initial value). Tab 3: Full Consolidation worksheet using the equity method. Tab 4: Full Consolidation worksheet using the partial equity method. Tab 5: Full Consolidation worksheet using the initial value method. . Parent (14,991,000) 11,699,250 ? ? Subsidiary (6,084,750) 3,733,500 Revenues Operating Expenses Income of Subsidiary Net Income (2,351,250) ? Retained Earnings - Parent, 1/1/2022 Retained Earnings - Subsidiary, 1/1/2022 Net Income (above) Dividends Declared Retained Earnings, 12/31/2022 ? 2,850,000 ? (2,864,250) (2,351,250) 498,750 (4,716,750) 1,353,750 2,037,750 2,807,250 Cash Receivables Inventory Investment in Subsidiary Co. Land Equipment (net) Software Other Intangibles Goodwill Total Assets 2,778,750 3,519,750 5,913,750 ? 4,859,250 3,421,425 1,211,250 1,425,000 4,446,000 2,066,250 ? 13,281,000 Liabilities Common Stock Retained Earnings (above) Total liabilities and equity (21,903,675) (7,125,000) ? ? (3,576,750) (4,987,500) (4,716,750) (13,281,000) Fair Value Allocation Schedule Price Paid Book Value Excess Initial Value to land to brand name to software to IPR&D to goodwill 20,662,500 (6,783,000) 13,879,500 (142,500) 855,000 1,425,000 4,275,000 7,467,000 Amortization 2021 2022 ? ? ? ? ? ? ? ? ? ? 2 Parent Company acquired 100 percent of Subsidiary's outstanding stock for $20,662,500 cash on January 1, 2021. At the date of acquisition, Subsidiary's balance sheet was as follows. (Note: Debits are shown as positive, and credits are shown as negative.) Cash Receivables Inventory Land Equipment (net) Software Liabilities Common Stock Retained Earnings 527,250 1,168,500 2,123,250 1,282,500 3,206,250 4,488,750 (6,013,500) (4,987,500) (1,795,500) Certain assets and liabilities had fair values that differed from their book values. The fair values of these were as follows (note: this is not the difference between fair value and book value; this is the fair value): Land 1,140,000 Brand Name (indefinite life) 855,000 Software (2 year life) 5,913,750 IP R&D (10 year life) 4,275,000 Other relevant information: Parent's 1/1/2022 retained earnings balance (excluding the effect of any 2021 subsidiary transactions/income) was $13,252,500. The subsidiary had net income of $1,068,750 and paid no dividends in 2021. There are no intercompany payables/receivables between Parent and Subsidiary. The companies' 12/31/2022 trial balances are as follows: Required: Prepare an Excel workbook to consolidate Parent and Subsidiary's financial statements for 2022. The workbook should contain the following: Tab 1: The information contained on the previous page of these instructions, with the fair value allocation schedule completed. Tab 2: Calculation of the 12/31/2022 balance of the Investment in Subsidiary account (on Parent's books) using (1) the equity method, (2) the partial equity method, and (3) the initial value method. Also calculate Parent's 1/1/2022 retained earnings using each of these methods. Tab 2: A listing of all consolidation entries necessary under each of the respective methods (equity, partial equity, and initial value). Tab 3: Full Consolidation worksheet using the equity method. Tab 4: Full Consolidation worksheet using the partial equity method. Tab 5: Full Consolidation worksheet using the initial value method. . Parent (14,991,000) 11,699,250 ? ? Subsidiary (6,084,750) 3,733,500 Revenues Operating Expenses Income of Subsidiary Net Income (2,351,250) ? Retained Earnings - Parent, 1/1/2022 Retained Earnings - Subsidiary, 1/1/2022 Net Income (above) Dividends Declared Retained Earnings, 12/31/2022 ? 2,850,000 ? (2,864,250) (2,351,250) 498,750 (4,716,750) 1,353,750 2,037,750 2,807,250 Cash Receivables Inventory Investment in Subsidiary Co. Land Equipment (net) Software Other Intangibles Goodwill Total Assets 2,778,750 3,519,750 5,913,750 ? 4,859,250 3,421,425 1,211,250 1,425,000 4,446,000 2,066,250 ? 13,281,000 Liabilities Common Stock Retained Earnings (above) Total liabilities and equity (21,903,675) (7,125,000) ? ? (3,576,750) (4,987,500) (4,716,750) (13,281,000) Fair Value Allocation Schedule Price Paid Book Value Excess Initial Value to land to brand name to software to IPR&D to goodwill 20,662,500 (6,783,000) 13,879,500 (142,500) 855,000 1,425,000 4,275,000 7,467,000 Amortization 2021 2022 ? ? ? ? ? ? ? ? ? ? 2

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