Question 1 (31.4 Marks)

A- Pickles Corporation purchased 70% of Salad Industries' common stock on January 2, 2019. On January 1, 2020, Saladsold equipment to Pickles that had a net book value of $80,000 and an original cost of $120,000 for $100,000. On January 1, 2020, Pickles sold a building to Salad that had a net book value of $1,000,000 and an original cost of $1,250,000 for $1,500,000. The equipment had a remaining useful life of 8 years, and the building had a remaining useful life of 20 years. Neither asset had salvage value. Both companies use straight-line depreciation.

Selected account balances are shown below for Pickles and Salad for the year ended December 31, 2020:

PicklesSalad

Sales$1,400,000$1,380,000

Cost of Goods Sold900,000500,000

Other Expenses300,000150,000

Building - net2,800,0001,425,000

Equipment - net1,580,000935,000

Required:

1. Calculate the following balances for the year ended December 31, 2020:

a. Consolidated "Other Expenses"

b. Consolidated Buildings

c. Consolidated Equipment

2. Calculate consolidated net income and controlling share of consolidated net income for 2020.

3. Prepare consolidation working paper entry to eliminate Income from subsidiary-parent share. No dividends were declared or paid.