Pharoas Corporation paid $16,200 for a 90% interest in Sonista Corporation on January 1, 2019, when Sonista stockholders' equity consisted of $10,000 Capital Stock and $3,000 of Retained Earnings. The excess cost over book value was attributable to goodwill.

Additional information:

1. All intercompany sales of inventory are made at 120% of cost. During 2019, Sonista 's sales to Pharoas were $4,800, of which half of the merchandise remained in Pharoa 's inventory at December 31, 2019. (The 2019ending inventory was sold in 2020.) During 2020, Pharoa's sales to Sonista were $6,000 of which 60% remained in Sonista's inventory at December 31, 2020. At year-end 2020, Sonista owed Pharoah $1,500 for the inventory purchased during 2020.

2. Pharoas Corporation sold equipment with a book value of $2,000 and a remaining useful life of four years and no salvage value to Sonista Corporation on January 1, 2020for $2,800. Straight-line depreciation is used.

3. Separate company financial statements for Pharoas Corporation and Subsidiary at December 31, 2020are summarized in the first two columns of the consolidation working papers.

4. The following information is available for 2019:

Sonista's income $4,000 - Sonista's dividends received by Pharoas $1,800

Required:

2) Complete the working papers to consolidate the financial statements of Penguin Corporation and subsidiary for the year ended December 31, 2020.

 

Transcribed Image Text:

Pharoah Sonista Eliminations Consolidated Debit Credit 68,000 INCOME STATEMENT Sales $60,000 $14,000 4, 560 80 mcome from Seagull Gain on equipment sale Cost of Sales Other Expenses Noncontrolling interest share Net income 26,000) (28,000) (4,400) 6600) $6,000 $11,360 $5,000 $9,500 11,360 6,000 7,000) 2000) $ 13,860 $9.000 Retained Eamings 1/1 Add: Net income Dividends Retained Eamings 12/31 BALANCE SHEET Cash Receivables Inventories $5.500 7,000 10,000 24,000 $3.000 4,000 4,500 9,000 Land Investment in Seagull Goodwill TOTAL ASSETS LIAB. & EQUITY Accounts payable Capital Stock Retained Eamings VI Nonertl Interest 1231Nonatil Interest TOTAL LIAB &EQUITIES 4.000 20,400 3,500 S70,900 $24,000 $7,040 30,000 $ 5,000 10,000 9,000 13,860 $70,900 $24,000 rks) Pharoah Sonista Eliminations Consolidated Debit Credit 68,000 INCOME STATEMENT Sales $60,000 $14,000 4, 560 80 mcome from Seagull Gain on equipment sale Cost of Sales Other Expenses Noncontrolling interest share Net income 26,000) (28,000) (4,400) 6600) $6,000 $11,360 $5,000 $9,500 11,360 6,000 7,000) 2000) $ 13,860 $9.000 Retained Eamings 1/1 Add: Net income Dividends Retained Eamings 12/31 BALANCE SHEET Cash Receivables Inventories $5.500 7,000 10,000 24,000 $3.000 4,000 4,500 9,000 Land Investment in Seagull Goodwill TOTAL ASSETS LIAB. & EQUITY Accounts payable Capital Stock Retained Eamings VI Nonertl Interest 1231Nonatil Interest TOTAL LIAB &EQUITIES 4.000 20,400 3,500 S70,900 $24,000 $7,040 30,000 $ 5,000 10,000 9,000 13,860 $70,900 $24,000 rks)

Answer rating: 100% (QA)

Tinoncial Stotement of Pharoos conpora hon Eliminatio... View the full answer