The financial statements of Plax Inc. and Slate Corp for the year ended December 31, 2020 are shown below:

 Income Statements 

	Plax Inc.	Slate Corp
Miscellaneous Revenues	$1,300,000	$400,000
Interest Revenues	$11,250
Dividend Revenue	$15,000
Less: Expenses
Miscellaneous Expense	$864,000	$259,200
Interest Expense		$19,400
Income Tax Expense	$198,000	$48,000
Net Income	$264,250	$73,400

  

Retained Earnings Statements

 

	Plax Inc.	Slate Corp
Balance, January 1, 2020	$490,000	$180,000
Net Income	$264,250	$73,400
Less: Dividends	$(126,000)	($20,000)
Retained Earnings	$628,250	$233,400

 

 Balance Sheets 

	Plax Inc.	Slate Corp
Miscellaneous Assets	$1,210,000	$745,200
Investment in Slate Shares	$196,000
Investment in Slate Bonds	$122,250
Total Assets	$1,528,250	$745,200
Miscellaneous Liabilities	$600,000	$150,000
Bonds Payable		$200,000
Bond Premium		$1,800
Common Shares	$300,000	$160,000
Retained Earnings	$628,250	$233,400
Total Liabilities and Equity	$1,528,250	$745,200

 Other Information:

 • Plax acquired 75% of Slate on January 1, 2016 for $196,000, when Slate's retained earnings was $80,000 and the acquisition differential was attributable entirely to goodwill. There were impairment losses to the goodwill of $6,400 and $1,600 in 2017 and 2020, respectively.

• Plax uses the cost method to account for its investment.

• Slate has 10% par value bonds outstanding in the amount of $200,000 which mature on December 31, 2023. The bonds were issued at a premium. On January 1, 2020 the unamortized premium amounted to $2,400 Slate uses the straight line method to amortize the premium.

• On January 1, 2020, Plax acquired $120,000 face value of Slate's bonds for $123,000 Plax also uses the straight line method to amortize any bond premium or discount.

• Both companies are subject to a 40% tax rate.

• Gains and losses from intercompany bond holdings are to be allocated to the two companies when consolidated financial statements are prepared.

 Prepare a Statement of Consolidated Retained Earnings for the year ended December 31, 2020 for Plax Inc.

Answer rating: 100% (QA)

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