Equity Method Yr 1

Parrot
Company
Income Statement
Revenues
Cost of Goods sold
Amortization expense
Depreciaiton expense
Equity in Subsidiary earnings
Net income

Sun
Company

###
700,000
120,000
80,000
(93,000)
(693,000)

(400,000)
250,000
20,000
30,000
(100,000)

Statement of Retained Earnings

Retained earnings, 1/1/10
(840,000)
net income
(693,000)
Dividends paid
120,000
Retained Earnings 12/31/10
###

(380,000)
(100,000)
40,000
(440,000)

Balance sheet
Current assets
Investment in Sun

Trademarks
Patented technology
Equipment
Goodwill
Total assets
Liabilities
Common stock
Additional PIC
Retained earnings, 12/31/10
Total liabilities & equity

1,040,000
853,000

400,000
-

600,000
370,000
250,000

200,000
288,000
220,000

3,113,000
1,108,000
(980,000)
(448,000)
(600,000)
(200,000)
(120,000)
(20,000)
###
(440,000)
### (1,108,000)

Consolidation Entries
DR
CR

13,000 E
6,000 E
93,000 I

380,000 S
40,000 D

40,000 D

20,000
130,000
6,000
80,000

A
A
E
A

200,000 S
20,000 S

600,000 S
200,000 A
93,000 I
13,000 E
30,000 A

Consolidated
Totals
(1,900,000)
950,000
153,000
104,000
(693,000)

(840,000)
(693,000)
120,000
(1,413,000)

1,440,000

820,000
775,000
446,000
80,000
3,561,000
(1,428,000)
(600,000)
(120,000)
(1,413,000)
(3,561,000)

Consolidation Entry S stockholders equoty

Retained earnings, 1/1/10 380,000
Common stock
200,000
Additional PIC
20,000
Investment in Sun
600,000
Consolidation Entry A
Trademarks
Patented technology
Goodwill
Equipment
Investment in Sun

FV allocations
20,000
130,000
80,000
30,000
200,000

Consolidation Entry I
Remove income earned by sub
Equity in Subsidiary earnings93,000
Investment in Sun
93,000
Consolidation Entry D
Investment in Sun
Dividends paid

eliminate divs paid to sub by parent

40,000
40,000

Consolidation Entry E
(depreciation & amort elimination expense of FV)
Amortization expense
13,000
Equipment
6,000
Depreciaiton expense
6,000
Patented technology
13,000

nation expense of FV)

Equity Method Yr 3
Parrot
Company
Income Statement
Revenues
Cost of Goods sold
Amortization expense
Depreciaiton expense
Equity in Subsidiary earnings
Net income

Sun
Company

###
1,000,000
200,000
100,000
(153,000)
(953,000)

(600,000)
380,000
20,000
40,000
(160,000)

Statement of Retained Earnings

Retained earnings, 1/1/13
###
net income
(953,000)
Dividends paid
420,000
Retained Earnings 12/31/13
###

(600,000)
(160,000)
70,000
(690,000)

Balance sheet
Current assets
Investment in Sun

Trademarks
Patented technology
Equipment
Goodwill
Total assets
Liabilities
Common stock
Additional PIC
Retained earnings, 12/31/13
Total liabilities & equity

1,705,000
1,082,000

500,000
-

600,000
540,000
420,000

240,000
420,000
210,000

4,347,000
1,370,000
###
(460,000)
(600,000)
(200,000)
(120,000)
(20,000)
###
(690,000)
### (1,370,000)

Consolidation Entries
DR
CR

13,000 E
6,000 E
153,000 I

600,000 S
70,000 D

70,000 D

20,000
91,000
6,000
80,000

A
A
E
A

40,000 P
200,000 S
20,000 S

40,000
820,000
179,000
153,000

P
S
A
I

13,000 E
12,000 A

Consolidated
Totals
(2,700,000)
1,380,000
233,000
134,000
(953,000)

(2,044,000)
(953,000)
420,000
(2,577,000)

2,165,000

860,000
1,038,000
624,000
80,000
4,767,000
(1,470,000)
(600,000)
(120,000)
(2,577,000)
(4,767,000)

Consolidation Entry S stockholders equoty

Retained earnings, 1/1/13 600,000
Common stock
200,000
Additional PIC
20,000
Investment in Sun
820,000
Consolidation Entry A
Trademarks
Patented technology
Goodwill
Equipment
Investment in Sun

FV allocations
20,000
91,000
80,000
12,000
179,000

Consolidation Entry I
Remove income earned by sub
Equity in Subsidiary earnings153,000
Investment in Sun
153,000
Consolidation Entry D
Investment in Sun
Dividends paid

eliminate divs paid to sub by parent

70,000
70,000

Consolidation Entry E
(depreciation & amort elimination expense of FV)
Amortization expense
13,000
Equipment
6,000
Depreciaiton expense
6,000
Patented technology
13,000
Consolidation Entry P
Liabilities
Current assets

(eliminate intra co payable and receivable

40,000
40,000

nation expense of FV)

nd receivable

Initial Value Method Yr 1

Parrot
Company
Income Statement
Revenues
Cost of Goods sold
Amortization expense
Depreciaiton expense
Dividend income
Net income

Sun
Company

###
700,000
120,000
80,000
(40,000)
(640,000)

(400,000)
250,000
20,000
30,000
(100,000)

Statement of Retained Earnings

Retained earnings, 1/1/10
(840,000)
Net income
(640,000)
Dividends paid
120,000
Retained Earnings 12/31/10
###

(380,000)
(100,000)
40,000
(440,000)

Balance sheet
Current assets
Investment in Sun

Trademarks
Patented technology
Equipment
Goodwill
Total assets
Liabilities
Common stock
Additional PIC
Retained earnings, 12/31/10
Total liabilities & equity

1,040,000
800,000

400,000
-

600,000
370,000
250,000

200,000
288,000
220,000

3,060,000
1,108,000
(980,000)
(448,000)
(600,000)
(200,000)
(120,000)
(20,000)
###
(440,000)
### (1,108,000)

Consolidation Entries
DR
CR

13,000 E
6,000 E
40,000 I

380,000 S
40,000 D

- D

20,000
130,000
6,000
80,000

A
A
E
A

200,000 S
20,000 S

600,000 S
200,000 A
40,000 I
13,000 E
30,000 A

Consolidated
Totals
(1,900,000)
950,000
153,000
104,000
(693,000)

(840,000)
(693,000)
120,000
(1,413,000)

1,440,000

820,000
775,000
446,000
80,000
3,561,000
(1,428,000)
(600,000)
(120,000)
(1,413,000)
(3,561,000)

Different from original

Consolidation Entry S
Retained earnings, 1/1/10
Common stock
Additional PIC
Investment in Sun

stockholders equty - same as equity method

380,000
200,000
20,000
600,000

Consolidation Entry A
Trademarks
Patented technology
Goodwill
Equipment
Investment in Sun

FV allocations - Same as equity method

20,000
130,000
80,000
30,000
200,000

Consolidation Entry I
Dividend income
Dividends paid

Remove income earned by sub

40,000
40,000

Consolidation Entry D

eliminate divs paid to sub by parent

Consolidation Entry E
(depreciation & amort elimination expense of FV) - Sa
Amortization expense
13,000
Equipment
6,000
Depreciaiton expense
6,000
Patented technology
13,000
Consolidation Entry P
Liabilities
Current assets

(eliminate intra co payable and receivable

40,000
40,000

equity method

ty method

nation expense of FV) - Same

nd receivable

Initial Value Method Yr 3

Parrot
Company
Income Statement
Revenues
Cost of Goods sold
Amortization expense
Depreciaiton expense
Dividend income
Net income

Sun
Company

###
1,000,000
200,000
100,000
(70,000)
(870,000)

(600,000)
380,000
20,000
40,000
(160,000)

Statement of Retained Earnings

Retained earnings, 1/1/13
Parrot Company
###
Sun Company
Net income
(870,000)
Dividends paid
420,000
Retained Earnings 12/31/13
###

(600,000)
(160,000)
70,000
(690,000)

Balance sheet
Current assets
Investment in Sun

Trademarks
Patented technology
Equipment
Goodwill
Total assets
Liabilities
Common stock
Additional PIC
Retained earnings, 12/31/13
Total liabilities & equity

Consolidation Entries
DR
CR

199,000 *C

1,705,000
800,000

500,000
-

600,000
540,000
420,000

240,000
420,000
210,000

600,000 S

80,000 A
4,065,000
1,370,000
###
(460,000)
(600,000)
(200,000)
(120,000)
(20,000)
###
(690,000)
### (1,370,000)

200,000 S

Consolidated
Totals
(2,700,000)
1,380,000
220,000
140,000
(70,000)
(1,030,000)

(2,044,000)
(1,030,000)
490,000
(2,584,000)

Consolidation Entry S stockholders equity

Retained earnings, 1/1/13 600,000
Common stock
200,000
Additional PIC
20,000
Investment in Sun
820,000
Consolidation Entry A
Trademarks
Patented technology
Goodwill
Equipment
Investment in Sun

FV allocations
20,000
91,000
80,000
12,000
179,000

Consolidation Entry I
Dividend income
Dividends paid

Remove income earned by sub

70,000
70,000

Consolidation Entry D

eliminate divs paid to sub by parent

2,205,000

840,000
960,000
630,000
80,000
2,510,000
(1,510,000)
(600,000)
(140,000)
(2,584,000)
(4,834,000)

Consolidation Entry E
(depreciation & amort elimination expense of FV
Amortization expense
13,000
Equipment
6,000
Depreciaiton expense
6,000
Patented technology
13,000
Consolidation Entry P
Liabilities
Current assets

(eliminate intra co payable and receivable

40,000
40,000

Consolidation Entry *C (converting beginning RE to full equity)

Investment in Sun
199,000
Retained earnings, 1/1/13
199,000

sub by parent

elimination expense of FV)

able and receivable

o full equity)

Partial Equity Method Yr 1

Parrot
Company
Income Statement
Revenues
Cost of Goods sold
Amortization expense
Depreciaiton expense
Equity in Subsidiary earnings
Net income

Sun
Company

###
700,000
120,000
80,000
(100,000)
(700,000)

(400,000)
250,000
20,000
30,000
(100,000)

Statement of Retained Earnings

Retained earnings, 1/1/10
(840,000)
net income
(700,000)
Dividends paid
120,000
Retained Earnings 12/31/10
###

(380,000)
(100,000)
40,000
(440,000)

Balance sheet
Current assets
Investment in Sun

Trademarks
Patented technology
Equipment
Goodwill
Total assets
Liabilities
Common stock
Additional PIC
Retained earnings, 12/31/10
Total liabilities & equity

1,040,000
860,000

400,000
-

600,000
370,000
250,000

200,000
288,000
220,000

3,120,000
1,108,000
(980,000)
(448,000)
(600,000)
(200,000)
(120,000)
(20,000)
###
(440,000)
### (1,108,000)

Consolidation Entries
DR
CR

Consolidated
Totals

Common Stock 200000

Additional PIC
20000
Investment in Sun
Consolidation Entry A
Trademarks

Consolidation Entry D
Investment In Sun

Consolidation Entry E
Amortization Expense

Partial Equity Method Yr 3

Parrot
Company
Income Statement
Revenues
Cost of Goods sold
Amortization expense
Depreciaiton expense
Equity in Subsidiary earnings
Net income

(800,000)

(600,000)
380,000
20,000
40,000
(160,000)

Statement of Retained Earnings

Retained earnings, 1/1/13
Parrot Company
###
Sun Company
Net income
(800,000)
Dividends paid
420,000
Retained Earnings 12/31/13
###

(600,000)
(160,000)
70,000
(690,000)

Balance sheet
Current assets
Investment in Sun

Trademarks
Patented technology
Equipment
Goodwill
Total assets
Liabilities
Common stock
Additional PIC
Retained earnings, 12/31/13
Total liabilities & equity

###
1,000,000
200,000
100,000

Sun
Company

1,705,000
1,110,000

500,000
-

600,000
540,000
420,000

240,000
420,000
210,000

4,375,000
1,370,000
###
(460,000)
(600,000)
(200,000)
(120,000)
(20,000)
###
(690,000)
### (1,370,000)

Consolidation Entries
DR
CR

Consolidated
Totals

Trademarks
Patented Technology
Equipment
Goodwill

1/1/2010
Amortization
Depreciation
12/31/2010
Amortization
Depreciation
12/31/2011
Amortization
Depreciation
12/31/2012
Amortization
Depreciation
12/31/2013
Amortization
Depreciation
12/31/2014
Amortization
Depreciation
12/31/2015
Amortization
Depreciation
12/31/2016
Amortization
Depreciation
12/31/2017
Amortization
Depreciation
12/31/2018
Amortization
Depreciation
12/31/2019

+
+

20,000 Unlimited life - no amortization

130,000 10/year life
13,000
30,000 5/year life
6,000
80,000 no amortizaiton
Trademark
20,000
20,000
20,000
20,000
20,000
20,000
20,000
20,000
20,000
20,000
20,000

Pat Tech
130,000
(13,000)
117,000
(13,000)
104,000
(13,000)
91,000
(13,000)
78,000
(13,000)
65,000
(13,000)
52,000
(13,000)

Equip
(30,000)
6,000
(24,000)
6,000
(18,000)
6,000
(12,000)
6,000
(6,000)
6,000
-

39,000
(13,000)

26,000
(13,000)

13,000
(13,000)
-

Goodwill
80,000
80,000
80,000
80,000
80,000
80,000
80,000
80,000
80,000
80,000
80,000

Investment in Sun Company (Details)

Full Equity
1/1/2010
$800,000
Net income
100,000
Dividends
(40,000)
Amortization expense
(7,000)
12/31/2010
853,000
Net income
140,000
Dividends
(50,000)
Amortization expense
(7,000)
12/31/2011
936,000
Net income
90,000
Dividends
(20,000)
Amortization expense
(7,000)
12/31/2012
999,000
Net income
160,000
Dividends
(70,000)
Amortization expense
(7,000)
12/31/2013
1,082,000

Initial Val
###

Part Equity
###
100,000
(40,000)

800,000

860,000
140,000
(50,000)

800,000

950,000
90,000
(20,000)

800,000

###
160,000
(70,000)

800,000

###