PROBLEM $4-2$

Determine Method, Consolidated Workpaper, Wholly Owned Subsidiary LO $5$

Parry Corporation acquired a $100\%$ interest in Sent Company on January $1,2021,$ paying $$140,000.$ Financial statement data for the two companies for the year ended December $31,2021$ follow:

Income Statement

Parry

Sent

Sales $$476,000$ $$154,500$

Cost of goods sold $285,600121,000$

Other expense $45,50029,500$

Dividend income $3,5000$

Retained Earnings Statement

Balance, $1/176,00019,500$

Net income $148,4004,000$

Dividends declared $17,5003,500$

Balance Sheet

Cash $84,40029,000$

Accounts receivable $76,00056,500$

Inventory $49,50036,500$

Investment in Sent Company $140,0000$

Land $4,00012,000$

Accounts payable $27,00014,000$

Common stock $120,000100,000$

Retained earnings $206,90020,000$

Required:

What method is being used by Parry to account for its investment in Sent Company? How can you tell?

Prepare a workpaper for the preparation of consolidated financial statements on December $31,2021.$ Any difference between the book value of equity acquired and the value implied by the purchase price relates to subsidiary land.