Problem 1 - Consolidation Workpapers

Refer to this data to answer questions 21-23.

Parent Corporation acquired an 80% interest in Sub Corporation for $380,000 on January 1, 20X4 when Sub's stockholders' equity consisted of $200,000 capital stock and $75,000 retained earnings. The excess cost over book value acquired was allocated to inventory that was overvalued by $50,000 and sold in 20X4, to equipment that was undervalued by $100,000 and to goodwill. The undervalued equipment had an 8-year remaining useful life.

• Parent regularly sells inventory to Sub at 125% of cost. Intercompany sales were $200,000 in 20X5 and $100,000 in 20X6. Sub's inventory included $35,000 of this merchandise at 12/31/20X5 and $20,000 of this merchandise at 12/31/20X6.
• On October 1, 20X4 Sub sold Parent a building for $110,000. Sub had originally paid $150,000 for the building and had accumulated depreciation as of the date of sale of $90,000. Parent is depreciating the building at a rate of $22,000 per 12-month period.
• During 20X4 Sub sold land for which it had paid $50,000 to Parent for $65,000. Parent resold the land to outsiders during 20X6 for $75,000.

Complete the consolidation working papers. Click Here to Download the excel file, complete the file, save it to your computer, and upload the saved file in the drop box below.

Pilot Corporation and Subsidiary Consolidation Working Papers For the year ended December 31, 20X6 Adjustments & Consolidated Parent Sub Eliminations Statements INCOME STATEMENT: Credits Sales $900,000 $400,000 Incomefrom Sub 93,000 Gain on sale of Land 10,000 Cost of Goods Sold [600,000] [250,000] Operating Expenses (253,000) (50,000] Consolidated Net Income (CNI) Controlling Int Share of CNI $150,000 $100,000 STATEMENT OF RE: Retained Earnings - Parent $200,000 Retained Earnings - Sub $150,000 Net Income 150,000 100,000 Dividends [100,000] (50,000] Retained Earnings - 12131003 $250,000 $200,000 BALANCE SHEET: Cash $48,000 $70,000 Accounts Receivable Net 35,000 20,000 Inventories 83,000 60,000 Dividends Receivable 20,000 Land 160,000 30,000 Buildings 8: Equipment-net 320,000 305,000 Investment in Sub 464,000 Total Assets $1,130,000 $485,000 Accounts Payable $30,000 $15,000 Dividends Payable 50,000 25,000 Other liabilities 100,000 45,000 Capital stock 700,000 200,000 Retained Earnings 250,000 200,000 \f