Penn Corporation purchased 80 percent ownership of State Company on January 1, 20X2, at underlying book value. At that date, the fair value of the noncontrolling interest was equal to 20 percent of the book value of State. On January 1, 20X4, Penn sold 2,000 shares of State’s stock for $60,000 to Nonaffiliated Company and recorded a $10,000 increase in additional paid-in capital. Trial balances for the companies on December 31, 20X4, contain the following data:

State’s net income was earned evenly throughout the year. Both companies declared and paid their dividends on December 31, 20X4. Penn uses the equity method in accounting for its investment in State.

Required

a. Prepare the consolidation entries needed to complete a worksheet for 20X4.

b. Prepare a consolidation worksheet for 20X4.

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Cash Accounts Receivable Inventory Buildings & Equipment Investment in State Company Cost of Goods Sold Depreciation Expense Other Expenses Dividends Declared Accumulated Depreciation Accounts Payable Bonds Payable Common Stock ($10 par) Additional Paid-In Capital Retained Earnings Sales Income from State Total Penn Corporation Debit $ 30,000 70,000 120,000 650,000 162,000 210,000 20,000 21,000 15,000 Credit $ 170,000 50,000 200,000 200,000 60,000 320,000 280,000 18,000 $1,298,000 $1,298,000 State Company Debit $ 35,000 50,000 100,000 230,000 100,000 15,000 25,000 10,000 $565,000 Credit $ 95,000 20,000 30,000 100,000 20,000 130,000 170,000 $565,000