Question: ABC Company purchased ( 8 0 % ) of XYZ Company's common stock on January 1 , 2 0 2 3 ,

ABC Company purchased \(80\%\) of XYZ Company's common stock on January 1,2023, for \(\$ 250,000\). On December 31,2023, the companies prepared the following trial balances: \begin{tabular}{|l|l|l|}\hline & ABC Company & XYZ Company \\\hline Cash & \$ 161,500 & \$125,000\\\hline Inventory & 210,000 & 195,000\\\hline Investment in XYZ Company & 402,00 & -\\\hline Land & 75,000 & 150,000\\\hline Cost of Goods S & 410,000 & 125,000\\\hline Other Expenses & 100,000 & 80,000\\\hline Dividends Declared & 30,000 & 15,000\\\hline Total Debits & \$1,388,500 & \$690,000\\\hline Accounts Payable & \$ 154,500 & \$ 35,000\\\hline Common Stock & 200,000 & 150,000\\\hline Other Contributed Capital & 60,000 & 35,000\\\hline Retained Earnings, 1/1 & 50,000 & 60,000\\\hline Sales & 760,000 & 410,000\\\hline Equity in Subsidiary Income & 164,000 & -\\\hline Total Credits & \$1,388,500 & \$690,000\\\hline \end{tabular} Required: a. Prepare a consolidated statements workpaper on December 31,2023 using the Equity Method. Any difference between book value and the value implied by the purchase price relates to goodwill. b. A principal limitation of consolidated financial statements is their lack of separate financial information about the assets, liabilities, revenues, and expenses of the individual companies included in the consolidation. Identify at least 6 problems that the reader of consolidated financial statements would encounter as a result of this limitation.
ABC Company purchased \ ( 8 0 \ % \ ) of XYZ

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