Complete Equity with Upstream Sales (Note: This is the same problem as Problem 6-7 and Problem 6-13, but assuming the use of the complete equity method.)
Paque Corporation owns 90% of the common stock of Segal Company. The stock was purchased for $810,000 on January 1, 2000, when Segal Company’s retained earnings were $150,000.
Financial data for 2004 are presented here: LO5 Paque Segal Corporation Company Sales $1,650,000 $ 795,000 Equity in Subsidiary Income 91,125 Total Revenue 1,741,125 795,000 Cost of Goods Sold:
Beginning Inventory 225,000 165,000 Purchases 1,275,000 525,000 Cost of Goods Available 1,500,000 690,000 Less: Ending Inventory 210,000 172,500 Cost of Goods Sold 1,290,000 517,500 Other Expenses 310,500 206,250 Total Cost and Expense 1,600,500 723,750 Net Income $ 140,625 $ 71,250 1/1 Retained Earnings 798,000 180,000 Net Income 140,625 71,250 Dividends Declared (150,000) (60,000)
12/31 Retained Earnings $788,625 $ 191,250 Cash $ 93,000 $ 75,000 Accounts Receivable 319,500 168,750 Inventory 210,000 172,500 Investment in Segal Company 833,625 Other Assets 750,000 630,000 Total Assets $2,206,125 $1,046,250 Accounts Payable 105,000 45,000 Other Current Liabilities 112,500 60,000 Capital Stock 1,200,000 750,000 Retained Earnings 788,625 191,250 Total Liabilities and Equity $2,206,125 $1,046,250 The January 1, 2004, inventory of Paque Corporation includes $45,000 of profit recorded by Segal Company on 2003 sales. During 2004, Segal Company made intercompany sales of

$300,000 with a markup of 20% of selling price. The ending inventory of Paque Corporation includes goods purchased in 2004 from Segal Company for $75,000. Paque Corporation uses the complete equity method to record its investment in Segal Company.
Required:
A. Prepare the consolidated statements workpaper for the year ended December 31, 2004.
B. Calculate consolidated retained earnings on December 31, 2004, using the analytical or t-account approach.
C. If you completed Problem 6-7 or Problem 6-13, compare the consolidated balances obtained in requirement A with those obtained in those problems.