Question: Prime Company holds 80 percent of Lane Company s stock acquired

Prime Company holds 80 percent of Lane Company’s stock, acquired on January 1, 20X2, for $160,000. On the acquisition date, the fair value of the noncontrolling interest was $40,000. Lane reported retained earnings of $50,000 and had $100,000 of common stock outstanding. Prime uses the fully adjusted equity method in accounting for its investment in Lane. Trial balance data for the two companies on December 31, 20X6, are as follows:

Additional Information
1. At the date of combination, the book values and fair values of all separately identifiable assets and liabilities of Lane were the same. At December 31, 20X6, the management of Prime reviewed the amount attributed to goodwill as a result of its purchase of Lane stock and concluded an impairment loss of $18,000 should be recognized in 20X6 and shared proportionately between the controlling and noncontrolling shareholders.
2. On January 1, 20X5, Lane sold land that had cost $8,000 to Prime for $18,000.
3. On January 1, 20X6, Prime sold to Lane equipment that it had purchased for $75,000 on January
1, 20X1. The equipment has a total economic life of 15 years and was sold to Lane for $70,000. Both companies use straight-line depreciation.
4. There was $7,000 of intercompany receivables and payables on December 31, 20X6.

a. Give all elimination entries needed to prepare a consolidation worksheet for 20X6.
b. Prepare a three-part worksheet for 20X6 in good form.
c. Prepare a consolidated balance sheet, income statement, and retained earnings statement for20X6.
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  • CreatedMay 23, 2014
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