Server Corporation was created on January 1, 20X0, to develop computer software. On January 1, 20X5, Proxy Company acquired 90 percent of Server’s common stock at its underlying book value. At that date, the fair value of the noncontrolling interest was equal to 10 percent of the book value of Server Corporation. Trial balances for Proxy and Server on December 31, 20X9, follow:

On January 1, 20X7, Server sold equipment to Proxy for $48,000. Server had purchased the equipment for $90,000 on January 1, 20X5, and was depreciating it on a straight-line basis with a 10-year expected life and no anticipated scrap value. The equipment’s total expected life is unchanged as a result of the intercompany sale. Assume Proxy uses the fully adjusted equity method.

Required

a. Give all consolidation entries required to prepare a three-part consolidated working paper at December 31, 20X9.

b. Prepare a three-part worksheet for 20X9 in good form.

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Cash Accounts Receivable Other Receivables Inventory Land Buildings & Equipment Investment in Server Corporation Cost of Goods Sold Depreciation Expense Other Expense Dividends Declared Accumulated Depreciation Accounts Payable Other Payables Bonds Payable Bond Premium Common Stock Additional Paid-in Capital Retained Earnings Sales Other Income Income from Server Corporation Total Proxy Company Debit $82,000 80,000 40,000 200,000 80,000 500,000 229,500 500,000 45,000 95,000 40,000 $1,891,500 Credit $ 155,000 63,000 95,000 250,000 210,000 110,000 251,200 680,000 26,000 51,300 $1,891,500 Server Corporation Debit $ 32,400 90,000 10,000 130,000 60,000 250,000 250,000 15,000 75,000 20,000 $932,400 Credit $ 75,000 35,000 20,000 200,000 2,400 50,000 150,000 385,000 15,000 $932,400