Using the information presented in Problem 7-4, prepare a consolidated financial statements workpaper for the year ended December 31, 2025, using the trial balance format.

Data from problem 4

Prout Company owns 80% of the common stock of Sexton Company. The stock was purchased for $1,600,000 on January 1, 2022, when Sexton Company’s retained earnings were $800,000. On January 1, 2024, Prout Company sold fixed assets to Sexton Company for $360,000. These assets were originally purchased by Prout Company for $400,000 on January 1, 2014, at which time their estimated depreciable life was 25 years. The straight- line method of depreciation is used.

Transcribed Image Text:

On December 31, 2025, the trial balances of the two companies were as shown here: Prout Company Sexton Company $ 568,000 $ 271,000 1,972,000 830,000 1,000,800 1,600,000 1,600,000 Current Assets Fixed Assets Other Assets Investment in Sexton Company Dividends Declared Cost of Goods Sold Other Expenses (including depreciation) Income Tax Expense Total Liabilities Accumulated Depreciation Sales Dividend Income Common Stock Retained Earnings 1/1 Total 120,000 942,000 145,000 187,200 $6,535,000 $ 305,000 375,000 1,475,000 80,000 3,000,000 1,300,000 $6,535,000 100,000 795,000 90,000 90,000 $3,776,000 $ 136,000 290,000 1,110,000 1,200,000 1,040,000 $3,776,000