Pony Corporation acquired all of Stallion Company’s common shares on January 1, 20X5, for $180,000. On that date, the book value of the net assets reported by Stallion was $150,000. The entire differential was assigned to depreciable assets with a six-year remaining economic life from January 1, 20X5. The adjusted trial balances for the two companies on December 31, 20X5, are as follows:

Pony uses the equity method in accounting for its investment in Stallion. Stallion declared and paid dividends on December 31, 20X5.

Required

a. Prepare the consolidation entries needed as of December 31, 20X5, to complete a consolidation worksheet.

b. Prepare a three-part consolidation worksheet as of December 31, 20X5.

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Item Cash Accounts Receivable Inventory Depreciable Assets (net) Investment in Stallion Company Depreciation Expense Other Expenses Dividends Declared Accounts Payable Notes Payable Common Stock Retained Earnings Sales Income from Stallion Company Pony Corporation Debit $ 15,000 30,000 70,000 325,000 195,000 25,000 105,000 40,000 $805,000 Credit $ 50,000 100,000 200,000 230,000 200,000 25,000 $805,000 Stallion Company Debit $ 5,000 40,000 60,000 225,000 15,000 75,000 10,000 $430,000 Credit $ 40,000 120,000 100,000 50,000 120,000 $430,000