Problem $4-35($Static$)$ Comprehensive Problem: Wholly Owned Subsidiary LO $4-5$

Prime Corporation acquired $100$ percent ownership of Steak Products Company on January $1,20$X$1,$ for $$200,000.$ On that date, Steak

reported retained earnings of $$50,000$ and had $$100,000$ of common stock outstanding. Prime has used the equity method in

accounting for its investment in Steak.

The trial balances for the two companies on December $31,20$X$5,$ appear below:

Additional Information:

On the date of combination $($five years ago$),$ the fair value of Steak's depreciable assets was $$50,000$ more than the book value.

Accumulated depreciation at that date was $$10,000.$ The differential assigned to depreciable assets should be written off over the

following $10-$year period.

There was $$10,000$ of intercorporate receivables and payables at the end of $205.$