Paulee Corporation paid $24,800 for an 80% interest in Sergio Corporation on January 1, 2013, at which time Sergio's stockholders' equity consisted of $15,000 of Common Stock and $6,000 of Retained Earnings. The fair values of Sergio Corporation's assets and liabilities were identical to recorded book values when Paulee acquired its 80% interest.

Sergio Corporation reported net income of $9,000 and paid dividends of $5,000 during 2014.

Paulee Corporation sold inventory items to Sergio during 2013 and 2014 as follows:

                                                      2013             2014

Paulee's sales to Sergio              $5,000          $6,000

Paulee's cost of sales to Sergio     3,000            3,500

Unrealized profit at year-end          1,000            1,500

At December 31, 2014, the accounts payable of Sergio include $1,500 owed to Paulee for inventory purchases.

Required:

Financial statements of Paulee and Sergio appear in the first two columns of the partially completed working papers. Complete the consolidation working papers for Paulee Corporation and Subsidiary for the year ended December 31, 2014.

Paulee Corporation and Subsidiary

Consolidation Working Papers

for the year ended December 31, 2014

 

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Eliminations Paulee Sergio Debit Credit Consolidated INCOME STATEMENT Sales Invest. income from Sergio $ 43,000 $20,000 6,700 ( 8,000) ( 3,000) Cost of Sales other expenses Noncontrolling interest share Net income Retained Earnings 1/1 Add: Net income Less: Dividends Retained Earnings 12/31 ( 22,000) ( 12,200) $ 15,500 $ 9,000 $ 9,000 15,500 ( 10,000) $ 8,000 9,000 (5,000) $ 14,500 $12,000 BALANCE SHEET Cash Net Receivables Dividend Receivable Inventories Goodwill $ 5,400 14,000 $ 3,000 10,000 2,000 18,000 ৪, ০০০ Plant assets-net 24,000 31,000 Investment in Sergio TOTAL ASSETS 28,100 $ 91,500 $52,000 LIAB. & EQUITY Accounts payable $ 17,500 Dividend payable other debt Capital stock Retained Earnings 1/1 Noncntrl. Interest 12/31 Noncntrl. Interest $12,500 7,000 12,500 40,000 2,500 10,000 15,000 14,500 12,000 TOTAL LIAB. & EQUITY $ 91,500 $52,000 Eliminations Paulee Sergio Debit Credit Consolidated INCOME STATEMENT Sales Invest. income from Sergio $ 43,000 $20,000 6,700 ( 8,000) ( 3,000) Cost of Sales other expenses Noncontrolling interest share Net income Retained Earnings 1/1 Add: Net income Less: Dividends Retained Earnings 12/31 ( 22,000) ( 12,200) $ 15,500 $ 9,000 $ 9,000 15,500 ( 10,000) $ 8,000 9,000 (5,000) $ 14,500 $12,000 BALANCE SHEET Cash Net Receivables Dividend Receivable Inventories Goodwill $ 5,400 14,000 $ 3,000 10,000 2,000 18,000 ৪, ০০০ Plant assets-net 24,000 31,000 Investment in Sergio TOTAL ASSETS 28,100 $ 91,500 $52,000 LIAB. & EQUITY Accounts payable $ 17,500 Dividend payable other debt Capital stock Retained Earnings 1/1 Noncntrl. Interest 12/31 Noncntrl. Interest $12,500 7,000 12,500 40,000 2,500 10,000 15,000 14,500 12,000 TOTAL LIAB. & EQUITY $ 91,500 $52,000

Answer rating: 100% (QA)

All preliminary computations Retained Earnings Investment In Sergio Income from Sergio 2015 Inventor... View the full answer