On January 1, 2013, Apple Company acquired Netflix Company. Apple paid $820,000 for 80% of Netflix’ common stock. On the date of acquisition, Netflix…

On January 1, 2013, Apple Company acquired Netflix Company. Apple paid $820,000 for 80% of Netflix’ common stock. On the date of acquisition, Netflix had

the following balance sheet:

Netflix Company

Balance Sheet

January 1, 2013

AssetsLiabilities and Equity

Accounts Receivable$182,400 Accounts Payable$165,500

Inventory 124,600Bonds Payable208,500

Land274,000Common Stock280,000

Buildings272,500Paid-In Capital in Excess of Par 220,000

Accumulated Depreciation (74,500)Retained Earnings188,000


Accumulated Depreciation (126,000)


Total Assets$1,062,000 Total Liabilities and Equity $1,062,000

Buildings, which have a 25 year life, are overstated by $45,000. Equipment, which has a 18 year life, is overstated by $45,900. Any remaining excess is attributed to

goodwill. Apple uses the partial equity method to account for its investment in Netflix.

On January 1, 2015, Netflix held merchandise sold to it from Apple for $210,000. This beginning inventory had an applicable gross profit of 30%. During 2015, Apple sold

merchandise to Netflix for $528,000. On December 31, 2015, Netflix held $75,000 of this merchandise in its inventory. This ending inventory had an applicable gross profit of

35%. Netflix owed Apple $74,000 on December 31, as a result of this intercompany sale.

On January 1, 2013, Apple sold equipment to Netflix at a profit of $120,000. Depreciation on this equipment is computed over an 15 year life, using the straight-line method.

On January 1, 2014, Netflix sold equipment with a book value of $125,500 to Apple for $160,500. This equipment has a 20 year life and is depreciated using the straight line


Apple and Netflix had the following trial balances on December 31, 2015:

Apple CoNetflix Co

Cash140,000 86,200

Accounts Receivable192,400 254,000

Inventory245,200 145,900

Land220,000 182,000

Investment in Netflix996,400

Buildings450,000 320,000

Accumulated Depreciation – Buildings(255,000)(140,000)

Equipment240,000 280,000

Accumulated Depreciation – Equipment(142,000)(48,400)


Accounts Payable(294,000)(75,000)

Bonds Payable(184,200)

Common Stock(380,000)(280,000)

Paid-In Capital in Excess of Par(400,000)(220,000)

Retained Earnings(800,300)(308,000)


Cost of Goods Sold512,800 354,000

Depreciation Expense – Buildings82,200 38,000

Depreciation Expense – Equipment42,000 28,000

Other Expenses148,700 134,000

Interest Expense55,350

Subsidiary Income(160,400)

Dividends Declared62,000 100,000

Totals0 0

How would I make an allocation and amortization schedule for the investment in Netflix?

 How would I complete the consolidated entries and the consolidated financial statements for Apple Company and its Subsidiary Netflix Company as of December 31, 2015?

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