On January 1, 2016, Parent Company Purchased 100% of the Common

Essay

On January 1, 2016, Parent Company purchased 100% of the common stock of Subsidiary Company for $390,000.On this date, Subsidiary had common stock, other paid in capital, and retained earnings of $50,000, $100,000, and $200,000 respectively.Any excess of cost over book value is due to goodwill.Parent accounts for the Investment in Subsidiary using the simple equity method.
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On January 1, 2017, Parent purchased equipment for $204,120 and immediately leased the equipment to Subsidiary on a 4-year lease.The minimum lease payments of $60,000 are to be made annually on January 1, beginning immediately, for a total of 4 payments.The implicit interest rate is 12%.The lease provides for an automatic transfer of title at the end of 4 years.The estimated useful life of the equipment is 6 years.The lease has been capitalized by both companies.
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A lease amortization schedule, applicable to either company, is presented below:
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On January 1, 2016, Parent held merchandise acquired from Subsidiary for $10,000.During 2016, subsidiary sold merchandise to Parent for $50,000, of which $15,000 is held by Parent on December 31, 2016.Subsidiary's usual gross profit on affiliated sales is 40%.
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Required:
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Complete the Figure 5-12 worksheet for consolidated financial statements for the year ended December 31, 2016.Round all computations to the nearest dollar.
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