Prime Corporation acquired 100 percent ownership of Steak Products Company on January 1, 20X1, for $200,000. On that date, Steak reported retained earnings of $50,000 and had $100,000 of common stock outstanding. Prime has used the equity method in accounting for its investment in Steak.

The trial balances for the two companies on December 31, 20X5, appear below.

Additional Information

1. On the date of combination (five years ago), the fair value of Steak’s depreciable assets was $50,000 more than the book value. Accumulated depreciation at that date was $10,000. The differential assigned to depreciable assets should be written off over the following 10-year period.

2. There were $10,000 of intercorporate receivables and payables at the end of 20X5.

Required

a. Give all journal entries that Prime recorded during 20X5 related to its investment in Steak.

b. Give all consolidation entries needed to prepare consolidated statements for 20X5.

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

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Item Cash & Receivables Inventory Land Buildings & Equipment Investment in Steak Products Company Cost of Goods Sold Depreciation Expense Inventory Losses Dividends Declared Accumulated Depreciation Accounts Payable Notes Payable Common Stock Retained Earnings Sales Income from Steak Products Company Prime Corporation Debit $ 43,000 260,000 80,000 500,000 235,000 120,000 25,000 15.000 30,000 Credit $ 205,000 60,000 200,000 300,000 318,000 200,000 25,000 $1,308,000 $1,308,000 Steak Products Company Debit Credit $ 65,000 90,000 80,000 150,000 50,000 15,000 5,000 10,000 $465,000 $105,000 20,000 50,000 100,000 90,000 100,000 $465,000