On January 1, 20X5, Pond Corporation acquired 80 percent of Skate Company's stock by issuing common stock with a fair value of $180,000. At that date, Skate reported net assets of $150,000. The fair value of the noncontrolling interest was $45,000. Assume Pond uses the fully adjusted equity method. The balance sheets for Pond and Skate at January 1, 20X8, and December 31, 20X8, and income statements for 20X8 were reported as follows:

Additional Information

1. In 20X2, Skate developed a patent for a high-speed drill bit that Pond planned to market extensively. In accordance with generally accepted accounting standards, Skate charges all research and development costs to expense in the year the expenses are incurred. At January 1, 20X5, the market value of the patent rights was estimated to be $50,000. Pond believes the patent will be of value for the next 20 years. The remainder of the differential is assigned to buildings and equipment, which also had a 20-year estimated economic life at January 1, 20X5. All of Skate's other assets and liabilities identified by Pond at the date of acquisition had book values and fair values that were relatively equal.

2. On December 31, 20X7, Pond sold a building to Skate for $65,000 that it had purchased for $125,000 and depreciated on a straight-line basis over 25 years. At the time of sale, Pond reported accumulated depreciation of $75,000 and a remaining life of 10 years.

3. On July 1, 20X6, Skate sold land that it had purchased for $22,000 to Pond for $35,000. Pond is planning to build a new warehouse on the property prior to the end of 20X9.

4. Both Pond and Skate paid dividends in 20X8.

Required

a. Give all elimination entries required to prepare a three-part consolidation working paper at December 31, 20X8.

b. Prepare a three-part worksheet for 20X8 in good form.

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20X8 Balance Sheet Data January 1 December 31 January 1 December 31 Accounts Receivable Interest & Other Receivables Buildings & Equipment Accumulated Depreciation Investment in Skate Company Stock Investment in Tin Co. Bonds 185,600 Interest & Other Payables Additional Paid-in Capital Total Liabilities & Equities 20X8 Income Statement Data Income from Subsidiary Interest Income $136,000 Other Operating Expenses s Expenses