Refer to P4-6. During 20X8, the following events occurred: 1. Serena Inc. had sales of $ 800,000

Question:

Refer to P4-6. During 20X8, the following events occurred:

1. Serena Inc. had sales of $ 800,000 to Pradeesh Corp. Serena’s gross margin was still 40% of selling price, and its income tax rate continued to be 25%. At year- end, $ 120,000 of these goods was still in Pradeesh’s inventory.

2. On October 1, 20X8, Serena sold its land to Pradeesh for $ 185,000 (on which income taxes were due for $ 20,000). Pradeesh paid Serena $ 85,000 and gave a promissory note for $ 100,000 that was due in three years at 10% interest per year, simple interest to be paid at maturity.

3. $ 60,000 that Serena owed to Pradeesh at the beginning of the year was repaid during 20X8.

4. Pradeesh paid dividends of $ 100,000 during the year; Serena paid dividends of $ 70,000. The pre- closing trial balances of Pradeesh and Serena at December 31, 20X8, are shown below.

Refer to P4-6. During 20X8, the following events occurred: 1.

Required

a. Determine Pradeesh Corp.’s equity in the earnings of Serena Inc. for 20X8. Determine the balance of the Investment in Serena account on Pradeesh’s books at December 31, 20X8, assuming that Pradeesh recorded its investment on the equity basis.

b. Prepare a comparative consolidated SFP and SCI for Pradeesh Corp. for 20X8.