Pillow Corporation acquired 80 percent ownership of Sheet Company on January 1, 20X7, for $173,000. At that date, the fair value of the noncontrolling interest was $43,250. The trial balances for the two companies on December 31, 20X7, included the following amounts:

Additional Information

1. On January 1, 20X7, Sheet reported net assets with a book value of $150,000 and a fair value of $191,250. Accumulated depreciation on Buildings and Equipment was $60,000 on the acquisition date.

2. Sheet’s depreciable assets had an estimated economic life of 11 years on the date of combination. Goodwill of $25,000 was recorded at the acquisition.

3. Pillow used the equity method in accounting for its investment in Sheet.

4. Detailed analysis of receivables and payables showed that Sheet owed Pillow $16,000 on December 31, 20X7.

Required

a. Give all journal entries recorded by Pillow with regard to its investment in Sheet during 20X7.

b. Give all consolidation entries needed to prepare a full set of consolidated financial statements for 20X7.

c. Prepare a three-part consolidation worksheet as of December 31, 20X7.

Transcribed Image Text:

Item Cash Accounts Receivable Inventory Land Buildings & Equipment Investment in Sheet Company Cost of Goods Sold Depreciation Expense Other Expenses Dividends Declared Accumulated Depreciation Accounts Payable Mortgages Payable Common Stock Retained Earnings Sales Income from Sheet Company Pillow Corporation Debit $ 38,000 50,000 240,000 80,000 500,000 202,000 500,000 25,000 75,000 50,000 $1,760,000 Credit $ 155,000 70,000 200,000 300,000 290,000 700,000 45,000 $1,760,000 Sheet Company Debit $ 25,000 55,000 100,000 20,000 150,000 250,000 15,000 75,000 20,000 $710,000 Credit $ 75,000 35,000 50,000 50,000 100,000 400,000 $710,000