Pea Corporation acquired 80 percent of Split Companys stock on January 1, 20X1, at underlying book value.

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Pea Corporation acquired 80 percent of Split Company’s stock on January 1, 20X1, at underlying book value. At that date, the fair value of the noncontrolling interest was equal to 20 percent of Split’s book value. On January 1, 20X1, Split issued $300,000 par value, 8 percent, 10-year bonds to Malt Company. Pea subsequently purchased $100,000 of the bonds from Malt for $112,000 on January 1, 20X3. Interest is paid semiannually on January 1 and July 1. Assume Pea Corporation uses the fully adjusted equity method.


Summarized balance sheets for Pea and Split as of December 31, 20X4, follow:


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At December 31, 20X4, Split holds $42,000 of inventory purchased from Pea, and Pea holds $26,000 of inventory purchased from Split. Split and Pea sell at cost plus markups of 30 percent and 40 percent, respectively. Assume total sales from Pea to Split were $100,000 and from Split to Pea were $50,000.



Required


a. Prepare all consolidation entries needed on December 31, 20X4, to complete a consolidated balance sheet worksheet. Assume Split earned $75,000 and paid $10,000 in dividends during the year.


b. Prepare a consolidated balance sheet worksheet.


c. Prepare a consolidated balance sheet in good form.

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Advanced Financial Accounting

ISBN: 9781260772135

13th Edition

Authors: Theodore Christensen, David Cottrell, Cassy Budd

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