On August 31, 2019, Parent purchased 90% of Sub for

On August 31, 2019, Parent purchased 90% of Sub for cash consideration of $400,000. The respective balance sheets on the acquisition date were

Parent

Sub

Sub

(carrying value)

(carrying value)

(fair value)

Cash

$1,200,000

$300,000

$300,000

Accounts Receivable

$ 400,000

$ 64,000

$ 64,000

Inventory

$ 240,000

$ 80,000

$ 60,000

Plant and Equipment (net)

$ 860,000

$256,000

$300,000

Trademark

$ 20,000

$ 36,000

Total Assets

$2,700,000

$720,000

Accounts Payable

$1,500,000

$300,000

$300,000

Bonds Payable

$ 600,000

$240,000

$210,000

Common Shares

$ 500,000

$ 60,000

Retained Earnings

$ 100,000

$120,000

Total Liabilities and Equity

$2,700,000

$720,000

Required

  1. Prepare the Parents first consolidated balance sheet after the acquisition.
  2. Assume now Sub is located overseas. and both companies have completely different lines of business. The CEO asked you whether they it is possible not to consolidate the results Company Respond to the CEO with your own words . 

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