PART C

On January $1,2022,$ Porto Corporation acquired $80\%$ of the voting stock of Sardinia Corporation for $$12,000$ when Sardinia had Capital Stock of $$5,000$ and Retained Earnings of $$4,000.$ On this date, the book value of Sardinia$$s assets and liabilities was equal to the fair value, except for inventories, which were understated on the books by $$500$ and were sold in $2022,$ land which was undervalued by $$1,000,$ and equipment with a remaining useful life of $5$ years under the straight$-$line method which was undervalued by $$1,500.$ Any remainder was assigned to goodwill.

Financial statements for the two corporations at the end of the fiscal year ended December $31,2023$ appear in the first two columns of the partially completed consolidation working papers. Porto has accounted for its investment in Sardinia using the equity method of accounting. Porto Corporation owed Sardinia Corporation $$100$ on open account at the end of the year. Dividends receivable in the amount of $$450$ payable from Sardinia to Porto is included in Porto's net receivables.

Required:

$1)$ Prepare the elimination entries required for consolidation on December $31,2023.$ Show all your calculations.

$2)$ Complete the consolidation working papers for Porto Corporation and Subsidiary for the year ended December $31,2023.$

$3)$ State which items have been amortized and which have not in $2023,$ and why?

$(30$ Marks$)$INCOME STATEMENT

Solve the worksheet in the same table format as in the image