Pruitt Corporation owns 90% of the common stock of Sedbrook Company. The stock was purchased for $625,500 on January 1, 2009, when Sedbrook Company’s retained earnings were $95,000. Preclosing trial balances for the two companies at December 31, 2013, are presented here:

The January 1, 2013, inventory of Sedbrook Company includes $25,000 of profit recorded by Pruitt Corporation on 2012 sales. During 2013, Pruitt Corporation made intercompany sales of $250,000 with a markup of 20% on cost. The ending inventory of Sedbrook Company includes goods purchased in 2013 from Pruitt for $60,000.

A. Prepare the consolidated statements workpaper for the year ended December 31, 2013.
B. Calculate consolidated retained earnings on December 31, 2013, using the analytical or t-accountapproach.

  • CreatedMarch 13, 2015
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