Salinas's stockholders' equity consisted of $10,000 of Capital Stock and $5,000 of Retained Earnings. The difference between
Question:
Salinas's stockholders' equity consisted of $10,000 of Capital Stock and $5,000 of Retained Earnings. The difference between the fair value and book value of Salinas's net assets was allocated solely to a patent amortized over 5 years. The separate company accounts and items for Ponce and Salinas at December 31, 2019, appear below.
Accounts or Items Ponce Corp. Salinas Corp.
Sales $20,000 $15,000
Cost of Sales 9,200 4,700
Gross profit 10,800 10,300
Operating Expenses 2,300 4,000
Income from operations 8,500 6,300
Income from Salinas Corp 3,300 ------
Net income 11,800 6,300
Retained Earnings, January 1, 2019 11,000 5,000
Net income 11,800 6,300
Dividends 3,000 2,000
Retained Earnings, December 31, 2019 19,800 9,300
Assets:
Cash 2,000 1,900
Accounts Receivable (Net) 12,000 5,500
Inventory 14,000 8,000
Patent ----- ---------
Land 27,000 42,000
Building and Equipment (Net) 60,000 43,000
Investment in Salinas Corp. 31,300 --------
Total Assets 146,300 100,400
Liabilities and Equity
Accounts Payable 96,500 81,100
Common Stocks 30,000 10,000
Retained Earnings 19,800 9,300
Total liabilities and Equity $146,300 $100,400
1. What method for internal purposes use Parent Company?
2. Prepare in Journal form the eliminations entries and adjustments for consolidation purposes.
3. Prepare the required consolidated financial statements.