Proud Corporation acquired 80 percent of Spirited Company’s voting stock on January 1, 20X3, at underlying book value. The fair value of the noncontrolling interest was equal to 20 percent of the book value of Spirited at that date. Assume that the accumulated depreciation on depreciable assets was $48,000 on the acquisition date. Proud uses the equity method in accounting for its ownership of Spirited. On December 31, 20X4, the trial balances of the two companies are as follows:

		Proud Corporation								Spirited Company
Item	Debit				Credit				Debit					Credit
Current Assets		$	235,000							$	154,000
Depreciable Assets			502,000								315,000
Investment in Spirited Company			121,440
Depreciation Expense			22,000								12,000
Other Expenses			143,000								88,000
Dividends Declared			52,000								22,200
Accumulated Depreciation						$	195,000							$	72,000
Current Liabilities							68,000								48,000
Long-Term Debt							101,240								197,200
Common Stock							181,000								80,000
Retained Earnings							265,000								50,000
Sales							230,000								144,000
Income from Spirited Company							35,200
		$	1,075,440			$	1,075,440			$	591,200			$	591,200

Required:
a. Prepare all consolidation entries required on December 31, 20X4, to prepare consolidated financial statements. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

b. Prepare a three-part consolidation worksheet as of December 31, 20X4. (Values in the first two columns (the "parent" and "subsidiary" balances) that are to be deducted should be indicated with a minus sign, while all values in the "Consolidation Entries" columns should be entered as positive values. For accounts where multiple adjusting entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet.)

Please help me complete the figures in part A, and the consolidation worksheet.
 
 

Transcribed Image Text:

Accounts Debit Credit Common stock Retained earnings Income from Spirited Company NCI in NI of Spirited Company Dividends declared Investment in Spirited Company NCI in NA of Spirited Company Accumulated depreciation Depreciable assets Accounts Debit Credit Common stock Retained earnings Income from Spirited Company NCI in NI of Spirited Company Dividends declared Investment in Spirited Company NCI in NA of Spirited Company Accumulated depreciation Depreciable assets

Answer rating: 100% (QA)

Event Accounts Debit Credit 1 Common stock 80000 Retained earnings 50000 Income from Spirited Compan... View the full answer