Lance Corporation purchased 75 percent of the common stock of Avery Company at underlying book value on January 1, 20X3. Trial balances for Lance Corporation and Avery Company on December \(31,20 \times 7\), are as follows:

During 20X7, Lance Corporation resold inventory purchased from Avery in 20X6. It cost Avery \(\$ 44,000\) to produce the inventory, and Lance purchased it for \(\$ 59,000\). In 20X7, Lance purchased inventory for \(\$ 40,000\) and sold it to Avery for \(\$ 60,000\). At December 31, 20X7, Avery continued to hold \(\$ 27,000\) of the inventory.
Avery issued \(\$ 200,0008\) percent 10 -year, first mortgage bonds on January 1, 20X4, at 104 . Lance Corporation purchased \(\$ 80,000\) of the bonds from one of the original owners for \(\$ 78,400\) on December 31, 20X5. Both companies use straight-line write-off of premiums and discounts. Interest is paid annually on December 31 .
\section*{Required}

a. What amount of cost of goods sold will be reported in the \(20 \times 7\) consolidated income statement?

b. What inventory balance will be reported in the December 31, 20X7, consolidated balance sheet?

c. Prepare the journal entry to record interest expense for Avery for \(20 \times 7\).

d. Prepare the journal entry to record interest income for Lance for \(20 \mathrm{X} 7\).
\(e\). What amount will be assigned to noncontrolling interest in the consolidated balance sheet prepared at December 31, 20X7?

f. Prepare all eliminating entries needed at December 31, 20X7, to complete a three-part consolidated working paper.
g. Prepare a consolidation workpaper for \(20 \times 7\) in good form.

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20X7 Trial Balance Data Lance Corporation Avery Company Other Receivables Cash Item Accounts Receivable $ 37.900 110,000 30.000 Debit Credit Debit Credit $ 48.800 105,000 15.000 Inventory 167.000 120.000 Land 90,000 40,000 Buildings and Equipment 500,000 250.000 Investment in Avery Company Bonds 78.800 Stock 183,000 Cost of Goods Sold 620,000 240,000 Depreciation Expense 45,000 15.000 Interest and Other Expenses 35.000 22.000 Dividends Declared 50,000 24.000 Accumulated Depreciation $ 155.000 $ 75.000 Accounts Payable 118,000 35,000 Other Payables 40,000 20.000 Bonds Payable 250.000 200,000 Bond Premium 4.800 Common Stock Additional Paid-In Capital Retained Earnings Sales Interest and Other Income Income from Subsidiary Total 250,000 40,000 291,700 50.000 170.000 750,000 16.000 320,000 5.000 36,000 $1,946.700 $1,946.700 $879.800 $879.800