Prepare consolidation spreadsheet for intercompany sale of land – Equity method Assume a parent company acquired its subsidiary on…

Prepare consolidation spreadsheet for intercompany sale of land – Equity method Assume a parent company acquired its subsidiary on…

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Prepare consolidation spreadsheet for intercompany sale of land – Equity method
Assume a parent company acquired its subsidiary on January 1, 2020, at a purchase price that was $360,000 in excess of the book value of the subsidiary’s Stockholders’ Equity on the acquisition date. Of that excess,
$240,000 was assigned to an unrecorded Patent owned by the subsidiary that is being amortized over a 10-year period. The [A] Patent asset has been amortized as part of the parent’s equity method accounting. The
remaining $120,000 was assigned to Goodwill. In 2021, the wholly owned subsidiary sold Land to the parent for $144,000. The Land was reported on the subsidiary’s balance sheet for $96,000 on the date of sale. The
parent uses the equity method to account for its Equity Investment.
Financial statements of the parent and its subsidiary for the year ended December 31, 2022 are presented in d. below.
a. Show the computation to yield the $60,000 of Income (loss) from subsidiary reported by the parent for the year ended December 31, 2022
Note: Use a negative sign with an answer to indicate a reduction in the computation.
Net income of subsidiary
b. Show the computation to yield the $636,000 Equity Investment account balance reported by the parent on December 31, 2022.
Note: Use a negative sign with an answer to indicate a reduction in the computation.
Common stock
APIC
EOY Retained earnings
EOY Unamortized AAP
Gain on Intercompany sale
Equity investment
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Expert Answer:

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a Computation of Income Loss from Subsidiary for 2022 Given Purchase price excess 360 000 Excess all
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