Pearson Company owns 90% of the outstanding common stock of Spring Company. On January 1, 2011, Spring

Question:

Pearson Company owns 90% of the outstanding common stock of Spring Company. On January 1, 2011, Spring Company sold equipment to Pearson Company for $200,000. Spring Company had purchased the equipment for $300,000 on January 1, 2006, and had depreciated it using a 10% straight-line rate. The management of Pearson Company estimated that the equipment had a remaining useful life of five years on January 1, 2011. In 2012, Pearson Company reported $150,000 and Spring Company reported $100,000 in net income from their independent operations (including sales to affiliates).

Required:

A. Prepare in general journal form the work paper entries relating to the inter company sale of equipment that are necessary in the December 31, 2011, and December 31, 2012, consolidated financial statements work papers.

B. Calculate controlling interest in consolidated income for 2012.

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial... Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...