Prince Corporation acquired 100 percent of Sword Company on January 1, 20X7, for $182,000. The trial balances for the two companies on December 31, 20X7, included the following amounts: 

1. On January 1, 20X7, Sword reported net assets with a book value of $127,000. A total of $22,000 of the acquisition price is applied to goodwill, which was not impaired in 20X7.
2. Sword's depreciable assets had an estimated economic life of 11 years on the date of combination. The difference between fair value and book value of tangible assets is related entirely to buildings and equipment.
3. Prince used the equity-method in accounting for its investment in Sword.
4. Detailed analysis of receivables and payables showed that Sword owed Prince $15,000 on December 31, 20X7.

Prepare all consolidating entries needed to prepare a full set of consolidated financial statements for 20X7.

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Item Cash Accounts Receivable Inventory Land Buildings and Equipment Investment in Sword Company Cost of Goods Sold Depreciation Expense Other Expenses Dividends Declared Accumulated Depreciation Accounts Payable Mortgages Payable. Common Stock Retained Earnings Sales. Income from Sword Company $ Prince Corporation Debit Credit 86,000 52,000 184,000 84,000 493,000 236,000 493,000 23,000 58,000 52,000 $ 146,000 65,000 197,000 280,000 301,000 696,000 76,000 $1,761,000 $1,761,000 Sword Company Debit $ 31,000 57,000 117,000 26,000 164,000 260,000 13,000 58,000 22,000 $748,000 Credit $ 65,000 20,000 126,000 46,000 81,000 410,000 $748,000 Item Cash Accounts Receivable Inventory Land Buildings and Equipment Investment in Sword Company Cost of Goods Sold Depreciation Expense Other Expenses Dividends Declared Accumulated Depreciation Accounts Payable Mortgages Payable. Common Stock Retained Earnings Sales. Income from Sword Company $ Prince Corporation Debit Credit 86,000 52,000 184,000 84,000 493,000 236,000 493,000 23,000 58,000 52,000 $ 146,000 65,000 197,000 280,000 301,000 696,000 76,000 $1,761,000 $1,761,000 Sword Company Debit $ 31,000 57,000 117,000 26,000 164,000 260,000 13,000 58,000 22,000 $748,000 Credit $ 65,000 20,000 126,000 46,000 81,000 410,000 $748,000

Answer rating: 100% (QA)

Solution To consolidate the financial statements of Prince Corporation and Sword Company the following steps need to be taken 1 Eliminate the investme... View the full answer