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Assume that a parent company acquires its subsidiary on 1/1/xx, by exchanging 41,500 shares of its $1 par value common stock, with a market value on acquisition date of $36 per share, for all of the outstanding voting shares of the subsidiary. You have been charged with preparing the consolidation of these two entities at 12/31/xx.

On acquisition date (1/1/xx), all of the subsidiary's assets and liabilities had fair values equaling their book values except PPE assets are undervalued by $81,000 (depreciation =$5,400 per year), the subsidiary has an unrecorded patent with a fair value of $261,000 (amortization = $32,625 per year) and the parent records $162,000 of goodwill in the transaction.

• Prepare the consolidated balance sheet at 12/31/xx by placing the appropriate entries in their respective debit/credit column cells.
• Indicate, in the blank column cell to the left of the debit and credit column cells if the entry is a [C], [E] or [A] or [D] entry.
• Use Excel formulas to derive the Consolidated column amounts and totals.
• Using the "Home" key in Excel, go to the "Styles" area and highlight the [C], [E], [A] and [D]cell entries in different shades.

2 3 4 Income Statement 5 Sales 6 Cost of goods sold 7 Gross profit 8 Equity income 9 Operating expenses 10 Net income 11 12 Statement of retained earnings: 13 BOY retained earnings 14 Net income 15 Dividends 16 Ending retained earnings 17 18 Balance sheet: 19 Assets 20 Cash 21 Accounts receivable 22 Inventory 23 Equity investment 24 25 26 Property, plant and equipment (PPE), net 27 Patent 28 Goodwill 29 30 Liabilities and stockholders' equity 31 Accounts payable 32 Accrued liabilities 33 Long-term liabilities 34 Common stock 35 APIC 36 Retained earnings 37 38 Parent 4,950,000 (3,465,000) 1,485,000 169,875 (940,500) 714,375 2,570,400 714,375 (144,180) 3,140,595 275,355 633,600 960,300 1,632,690 3,629,340 7,131,285 362,340 430,650 566,100 2,631,600 3,140,595 7,131,285 Subsidiary 1,485,000 (891,000) 594,000 (386,100) 207,900 767,250 207,900 (31,185) 943,965 382,635 344,520 442,530 818,730 1,988,415 141,570 185,130 495,000 99,000 123,750 943,965 1,988,415 Consolidation Entries Dr 0 Cr 0 Consolidated 0 0 0 0 0 0 Oooo 0 0 0 0 0 0 oooo 0 0 0 0 0 0 0 0 0 0 0

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