HW $4-5$ SOLUTION

On January $1,2022,$ Plank Company purchased $70\%$ of the outstanding capital stock of Scoba Company for $$53,375.$ At that time, Scoba's

stockholder's equity consisted of capital stock of $$52,000$ ; other contributed capital, $$7,000$ and retained earnings of $ $7,500.$ On

December $31,2025,$ the two companies trial balances were shown below.

The accounts payable of Scoba Company include $ $4,500$ payable to Plank Company.

A$.$ What method s being used by Plank to account for its investment in Scoba Company? How can you tell?

B$.$ Prepare a consolidated statements workpaper at December $31,2025.$ Any difference between book value and the value implied by

the purchase price relates to subsidiary land.

A$.$

Plank Company and Subsidiary

Consolidated Statements Workpaper

For the Year Ended December $31,2025$

Plank Company Scoba Company Eliminating Entries Noncontrolling Interest Consolidated Balance

Income Statement

Sales $107,00062,000$

Equity Income $14,700-$

Total Revenue $121,70062,000$

Cost of Goods Sold $75,40030,000$

Other Expenses $15,00011,000$

Total Cost and Expense $90,40041,000$

Net Income $31,30021,000$

Noncontrolling Interest

Net Income to Retained Earnings $31,30021,000$

Retained Earnings Statement

Retained Earnings $1/1$

Plank Company $48,800$

Scoba Company $28,000$

Net Income from Above $31,30021,000$

Dividends Declared

Plank Company $(10,000)$

Scoba Company $(8,000)$

Retained Earnings $12/3170,10041,000$

Balance Sheet

Cash $42,27528,000$

Accounts Receivable $21,00026,000$

Inventory $12/3115,0008,000$

Investment in Scoba $76,825$

Difference b$/$w Implied & Book Value

Land $52,00048,000$

Total $207,100110,000$

$8,000,62,000$Accounts Payable $12,0006,000$

Other Liabilities $5,0004,000$

Common Stock

Plank Company $100,000$

Scoba Company $52,000$

Other Contributed Capital

Plank Company $20,000$

Scoba Company $7,000$

Retained Earnings from Above $70,10041,000$

$1/1$ Noncontrolling Interest

$12/31$ Noncontrolling Interest

Total $207,100110,000$