In January 1, 2019, Strolle Company acquired a 70% interest in Hailey Company for a purchase price that was $500,000 ove

[answerhappygod]

In January 1, 2019, Strolle
Company acquired a 70% interest in Hailey Company for a purchase
price that was $500,000 over the book value of Hailey’s
Stockholders’ Equity on the acquisition date. Spring uses the
equity method to account for its investment in Hailey. Strolle
assigned the acquisition-date AAP as follows:
AAP Items
Initial Fair Value
Useful Life (years)
Patent
350,000
10
Goodwill
150,000
Indefinite
$500,000
Hailey sells inventory to Strolle
(upstream) which includes that inventory in products that it
(Strolle), ultimately, sells to customers outside of the controlled
group. You have compiled the following data as of 2024 and
2025:
2024
2025
Transfer price for inventory sale
$305,500
$500,000
Cost of goods sold
-259,675
-440,000
Gross profit
$45,825
60,000
% inventory remaining
50%
40%
Gross profit deferred
$22,913
$24,000
EOY Receivable/Payable
$42,000
$18,000
The inventory not remaining at the end
of the year has been sold outside of the controlled
group.
Strolle and Hailey report the
following financial statements at December 31, 2025:
Income Statement
Strolle
Hailey
Sales
$4,500,000
$750,000
Cost of goods sold
-3,825,000
(660,000)
Gross Profit
675,000
90,000
Income (loss) from subsidiary
13,939
Operating expenses
-323,000
-34,000
Net income
$365,939
$56,000
Statement of Retained Earnings
Strolle
Hailey
BOY Retained Earnings
$4,465,000
$440,000
Net income
365,939
56,000
Dividends
-105,400
-10,000
EOY Retained Earnings
$4,725,539
$486,000
Balance Sheet
Strolle
Hailey
Assets:
Cash
$420,000
$425,000
Accounts receivable
304,000
545,000
Inventory
654,000
425,000
Equity Investment
782,600
PPE, net
6,723,539
420,000
$8,884,139
$1,815,000
Liabilities and Stockholders’ Equity:
Current Liabilities
$340,000
$175,000
Long-term Liabilities
1,750,000
753,000
Common Stock
853,600
92,100
APIC
1,215,000
308,900
Retained Earnings
4,725,539
486,000
$8,884,139
$1,815,000
Prepare the "C" "E" "A" "I CGS" Consolidation
Entry