On January 1, 2019, Penguin Corporation bought 80% of the stock of Sea Gull Corporation for $700,000. The Balance Sheets of the two companies immediately after the acquisition (January 1, 2019) of Sea Gull Corp. showed the following amounts:

On the date of acquisition, the Book Value of Sea Gull equaled its Fair Market Value, except for land that had a fair market value of $200,000, the fair value of previously unrecorded identifiable intangibles (2-year life) of Sea Gull was $40,000, and the NonControlling Interest's fair value is $175,000. Penguin uses the complete equity method to record its investment in Sea Gull. During 2019, Penguin found that a $7,000 impairment of goodwill took place during 2019. The following is the trial balance data for Penguin and Sea Gull on December 31, 2019:

Required:

A. Prepare the journal entries Penguin made during 2019 related to its investment in Sea Gull.

B. Prepare the consolidation eliminating entries needed to be made to consolidate the two companies at the end of 2019. *Also identify which of these eliminating entries are exactly the same as those that would have been done if a consolidation had been immediately done after the acquisition.

C. Prepare the consolidation working paper. Show all necessary Elimination entries in their proper columns.

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Cash Accounts Receivable Inventory Land Buildings & Equipment - Net Investment in Sea Gull Total Assets Accounts Payable Long-Term Liabilities Common Stock Additional Paid in Capital Retained Earnings Total Liabilities and Stockholders' Equity Penguin Sea Gull $ 140,000 $100,000 110,000 30,000 500,000 10,000 400,000 140,000 1,000,000 420,000 700,000 0 2,850,000 700,000 $ 410,000 1,090,000 1,000,000 350,000 $2,850,000 80,000 20,000 400,000 100,000 100,000 700,000 Debits: Credits: Cash Accounts Receivable Inventory Land Buildings & Equipment-Net Investment in Sea Gull Cost of Goods Sold Depreciation Expense Other Expenses Dividends Declared Accounts Payable Long-Term Liabilities Common Stock Additional Paid in Capital Retained Earnings, Jan. 1 Sales Income from Subsidiary Penguin $ 290,000 210,000 400,000 300,000 1,100,000 758,400 550,000 130,000 20,000 100,000 $3,858,400 $ 400,000 1,100,000 1,000,000 350,000 910,000 98,400 $3,858,400 Sea Gull $100,000 190,000 50,000 140,000 330,000 0 220,000 50,000 30,000 50,000 1,160,000 100,000 10,000 400,000 100,000 100,000 450,000 0 1,160,000 Cash Accounts Receivable Inventory Land Buildings & Equipment - Net Investment in Sea Gull Total Assets Accounts Payable Long-Term Liabilities Common Stock Additional Paid in Capital Retained Earnings Total Liabilities and Stockholders' Equity Penguin Sea Gull $ 140,000 $100,000 110,000 30,000 500,000 10,000 400,000 140,000 1,000,000 420,000 700,000 0 2,850,000 700,000 $ 410,000 1,090,000 1,000,000 350,000 $2,850,000 80,000 20,000 400,000 100,000 100,000 700,000 Debits: Credits: Cash Accounts Receivable Inventory Land Buildings & Equipment-Net Investment in Sea Gull Cost of Goods Sold Depreciation Expense Other Expenses Dividends Declared Accounts Payable Long-Term Liabilities Common Stock Additional Paid in Capital Retained Earnings, Jan. 1 Sales Income from Subsidiary Penguin $ 290,000 210,000 400,000 300,000 1,100,000 758,400 550,000 130,000 20,000 100,000 $3,858,400 $ 400,000 1,100,000 1,000,000 350,000 910,000 98,400 $3,858,400 Sea Gull $100,000 190,000 50,000 140,000 330,000 0 220,000 50,000 30,000 50,000 1,160,000 100,000 10,000 400,000 100,000 100,000 450,000 0 1,160,000

Answer rating: 100% (QA)

A Prepare the journal entries Penguin made during 2019 related to its investment in Sea Gull B Pr... View the full answer