PROBLEM 4-2 Determine Method, Consolidated Workpaper, Wholly Owned Subsidiary LO 5 Parry Corporation acquired a 100% interest in Sent Company on January 1, 2016, paying $140,000. Financial statement data for the two companies for the year ended December 31, 2016 follow: Income Statement Parry Sent Sales $476,000 $154,500 Cost of goods sold 285,600 121,000 Other expense 45,500 29,500 Dividend income 3,500 0 Retained Earnings Statement Balance, 1/1 76,000 19,500 Net income 148,400 4,000 Dividends declared 17,500 3,500 Balance Sheet Cash 84,400 29,000 Accounts receivable 76,000 56,500 Inventory 49,500 36,500 Investment in Sent Company 140,000 0 Land 4,000 12,000 Accounts payable 27,000 14,000 Common stock 120,000 100,000 Retained earnings 206,900 20,000 Problems 179 Required: A. What method is being used by Parry to account for its investment in Sent Company? How can you tell? B. Prepare a workpaper for the preparation of consolidated financial statements on December 31, 2016. Any difference between the book value of equity acquired and the value implied by the purchase price relates to subsidiary land. PROBLEM 4-3 Consolidated Workpaper, Wholly Owned Subsidiary Perkins Company acquired 100% of Schultz Company on January 1, 2017, for $161,500. On December 31, 2017, the companies prepared the following trial balances: Perkins Schultz Cash $ 25,000 $ 30,000 Inventory 105,000 97,500 Investment in Schultz Company 222,000 0 Land 111,000 97,000 Cost of Goods Sold 225,000 59,500 Other Expense 40,000 40,000 Dividends Declared 15,000 10,000 Total Debits $743,000 $334,000 Accounts Payable $ 72,500 $ 17,500 Capital Stock 160,000 75,000 Other Contributed Capital 35,000 17,500 Retained Earnings, 1/1 25,000 54,000 Sales 380,000 170,000 Equity in Subsidiary Income 70,500 0 Total Credits $743,000 $334,000 Required: A. What method is being used by Perkins to account for its investment in Schultz Company? How can you tell? B. Prepare a workpaper for the preparation of consolidated financial statements on December 31, 2017. Any difference between the book value of equity acquired and the value implied by the purchase price relates to goodwill.