On January 1, 20X1, Parent Company Purchased 80% of the Common

Essay

On January 1, 20X1, Parent Company purchased 80% of the common stock of Subsidiary Company for $402,000. On this date Subsidiary had total owners' equity of $440,000. Any excess of cost over book value is due to goodwill. Parent accounts for its investment in Subsidiary using the simple equity method.
On January 1, 20X3, Parent held merchandise acquired from Subsidiary for $50,000. During 20X3, Subsidiary sold merchandise to Parent for $120,000, of which Parent holds $30,000 on December 31, 20X3. Subsidiary's gross profit on sales is 40%. On December 31, 20X3, Parent still owes Subsidiary $5,000 for merchandise.
On December 31, 20X1, Parent sold $100,000 par value of 11%, 10-year bonds for $106,232, which resulted in an effective interest rate of 10%. The bonds pay interest semi-annually on June 30 and December 31. Parent uses the effective-interest method of amortization for the premium.
An amortization table for 20X2 and 20X3 is presented below:
On December 31, 20X2, Subsidiary repurchased $50,000 par value of the bonds, paying a price equal to par. The bonds are still held on December 31, 20X3.
On December 31, 20X3, Parent sold equipment with a cost of $50,000 and accumulated depreciation of $30,000 to Subsidiary for $40,000. Subsidiary will use the equipment beginning in 20X4.
Required:
Complete the Figure 5-7 worksheet for consolidated financial statements for the year ended December 31, 20X3. Round all computations to the nearest dollar.