CASE STUDY

PROBLEM 1: Parsley Parent acquired 100% of Sage Subsidiary on January 1, 2018. The purchase price was $370,000 in excess of Sage’s book value of Stockholders Equity on the acquisition date. Such excess was assigned to the following assets:

Original Amount       Original  Useful Life

Property, Plant & Equipment (PP&E), net         $80,000                       8 years

License Agreement                                                  $90,000                        6 years

Goodwill                                                                     $200,000                     Indefinite

$370,000

Selected accounts from the parent, subsidiary and consolidated financial statements for the year ended December 31, 2022 can be found in the accompanying Excel file.

Questions:

c. Show the detailed calculations arriving at each of the following accounts at December 31, 2022:

  • i. Consolidated Property, Plant and Equipment, net
  • ii. Consolidated License Agreement
  • iii. Consolidated Retained Earnings

d. What is the relationship between Parsley’s Net Income and Consolidated Net Income? Why?