Cat Corporation acquired all of Mouse Company's outstanding stock on January 1, 2019, for $600,000 cash. Mouse's accounting records showed net assets on that date of $470,000 although equipment with a 10-year life was undervalued on the records by $90,000. Any recognized goodwill is considered to have an indefinite life. Mouse reports net income in 2019 of $90,000 and $100,000 in 2020. The subsidiary paid dividends of $20,000 in each of these two years. 

	Cat	Mouse
Revenues	($800,000)	($600,000)
Cost of Goods sold	$100,000	$150,000
Depreciation Expenses	$300,000	$350,000
Investment Income	($91,000)
Net Income	($491,000)	($100,000)
Retained earnings 1/1/2021	($1,232,000)	($320,000)
Net Income (above)	($491,000)	($100,000)
Dividend paid	$120,000	$20,000
Retained earnings 12/31/2021	($1,603,000)	($400,000)
Current assets	$300,000	$100,000
Investment in Subsidiary	$803,000	$0
Equipment (net)	$900,000	$600,000
Buildings (net)	$800,000	$400,000
Land	$600,000	$100,000
Total Assets	$3,403,000	$1,200,000
Liabilities	($900,000)	($500,000)
Common Stock	($900,000)	($300,000)
Retained earnings 12/31/2021	($1,603,000)	($400,000)
Total Liabilities and Equity	($3,403,000)	($1,200,000)

Prepare the consolidation worksheet at December 31, 2021.

Account	Parent	Subsidiary	Consolidation Entries	Consolid. Totals
			Dr	Cr
Income Statement
Revenues	($800,000)	($600,000)
Cost of Goods Sold	$100,000	$150,000
Depreciation Expense	$300,000	$350,000
Investment Income	($91,000)
Net Income	($491,000)	($100,000)
Statement of Retained Earnings
Retained earnings 1/1/2021	($1,232,000)	($320,000)
Net Income (above)	($491,000)	($100,000)
Dividend paid	$120,000	$20,000
Retained earnings 12/31/2021	($1,603,000)	($400,000)
Balance Sheet
Current Assets	$300,000	$100,000
Investment in Sub.	$803,000	$0
Equipment, net	$900,000	$600,000
Buildings, net	$800,000	$400,000
Land	$600,000	$100,000
Total Assets	$3,403,000	$1,200,000
Liabilities	($900,000)	($500,000)
Common Stock	($900,000)	($300,000)
Retained earnings 12/31/2021	($1,603,000)	($400,000)
Total Liabilities and Equity	($3,403,000)	($1,200,000)

 

Answer rating: 100% (QA)

Consolidation worksheet at December 31 2021 as per equity method Income Statement Adjustments Particulars Cat Mouse Dr Cr Consolidated Total Revenue 8... View the full answer