Reference no: EM132953577

Question - On January 1, 2014, Parent purchased all of Child Inc. for $240,000. Child Inc. had a book value at that time of $140,000. Childs buildings (with a 6 year life) were undervalued on Childs records by $60,000 while equipment (with a two-year life) was overvalued by $8,000. Any consideration transferred over fair value of identified net assets acquired is assigned to goodwill. Child reported income of $30,000 and dividends of $20,000 in 2014.

1) Determine any goodwill from this investment.

2) What is the excess amortization for this investment in 2014 and 2015.

3) Journalize the equity method entries for 2014 and 2015.

4) What are the balances in the investment account, and the equity in Childs income account at the end of 2015?

5) Complete the partially completed consolidation worksheet on the following page.

a. Enter the balances of equity in Childs income and the investment account.

b. Fill in the missing totals (net income, retained earnings, total assets, total liabilities and equity).

c. Fill in the consolidation entries in the worksheet.

d. Fill in the consolidated totals/

6)  If Parent had used the Initial value method of internal reporting, how would the consolidation entries change?