Question

Peek Corporation owns 70% of the common stock of Seacrest Company. The stock was purchased for $420,000 on January 1, 2007, when Seacrest Company’s retained earnings were $100,000. Preclosing trial balances for the two companies at December 31, 2011, are presented here:


The January 1, 2011, inventory of Peck Corporation includes $10,000 of profit recorded by Seacrest Company on 2010 sales. During 2011, Seacrest Company made intercompany sales of $100,000 with a markup of 25% on cost. The ending inventory of Peck Corporation includes goods purchased in 2011 from Seacrest Company for $40,000. The affiliates file separate tax returns, and the prior, current, and expected future marginal income tax rates for both companies are 40%. Dividends received from Seacrest Company are subject to an 80% dividends received exclusion.

Required:
A. Prepare a consolidated statements workpaper for the year ended December 31, 2011.
B. Calculate the controlling interest in consolidated net income for the year ended December 31, 2011, and consolidated retained earnings on December 31, 2011, using the analytical or t-accountapproach.


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  • CreatedMarch 13, 2015
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