On January 1, 20X1, Parent Company Acquired 90% of the Common

Essay

On January 1, 20X1, Parent Company acquired 90% of the common stock of Subsidiary Company for $360,000. On this date, Subsidiary had total owners' equity of $270,000, including retained earnings of $100,000.
On January 1, 20X1, any excess of cost over book value is attributable to the undervaluation of land, building, and goodwill. Land is worth $20,000 more than cost. Building is worth $60,000 more than book value. It has a remaining useful life of 6 years and is depreciated using the straight-line method.
During 20X1, Parent has accounted for its investment in Subsidiary using the cost method.
During 20X1, Subsidiary sold merchandise to Parent for $70,000, of which $20,000 is held by Parent on December 31, 20X1. Subsidiary's usual gross profit on affiliated sales is 50%.
On December 31, 20X1, Parent still owes Subsidiary $5,000 for merchandise acquired in December.
On July 1, 20X1, Parent sold to Subsidiary some equipment with a cost of $40,000 and a book value of $18,000. The sales price was $30,000. Subsidiary is depreciating the equipment over a 4-year life, assuming no salvage value and using the straight-line method.
Required:
Prepare a determination and distribution of excess schedule. Next, complete the Figure 7-13 worksheet for a consolidated balance sheet as of December 31, 20X1.