Reference no: EM132882439
Question - A parent company acquired 80% of the common stock of a subsidiary for $140,000 cash on January 1, 2020. At this date, the subsidiary reported net assets equal to $150,000. The fair value of the subsidiary's common stock not purchased by the parent (i.e., the noncontrolling interest) is $33,000. The subsidiary's net assets had historical book values that approximately equaled their fair values, except for a customer list that had a fair value equal to $15,000 but a book value of $5,000. The customer list has a 5-year remaining useful life on January 1, 2020 (both pre-and post-acquisition). The parent uses the equity method to account for the investment in the subsidiary. The subsidiary reported a net income of $20,000 and paid dividends of $10,000 during 2020 and 2021.
Required -
1. Prepare consolidated financial statements for the year ended December 31, 2021.
2. Prepare the investment-related journal entries made on the parent's books during 2020 & 2021?
3. Using the consolidation worksheet, prepare the PRE-CONSOLIDATION financial statements for the year ended December 31, 2021 (i.e., fill in the missing accounts two years after the acquisition)
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