On January 1, 20X5, Pond Corporation purchased 80 percent of the stock of Skate Company by issuing common stock with a fair value of \(\$ 180,000\). At that date, Skate reported retained earnings of \(\$ 100,000\). The balance sheets for Pond and Skate at January 1, 20X8, and December 31, 20X8, and income statements for \(20 \times 8\) were reported as follows:

1. In 20X2 Skate Company developed a patent for a high-speed drill bit that Pond planned to market more 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 estimated market value of the patent rights was estimated to be \(\$ 50,000\). Pond feels the patent will be of value for the next 20 years. The remainder of the purchase differential is assigned to buildings and equipment, which also had an estimated economic life of 20 years at January 1, 20X5. All other assets and liabilities of Skate identified by Pond at the date of acquisition had book values and fair values that were relatively equal.
2. Pond Corporation sold a building to Skate for \(\$ 65.000\) on December 31, 20X7. The building was purchased by Pond 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 \(20 \mathrm{X} 9\).
4. Both Pond and Skate paid dividends in \(20 \mathrm{X} 8\).
\section*{Required}

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

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

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20X8 Balance Sheet Data Pond Corporation Skate Company December 31 January 1 December 31 January 1 Cash 40.400 68.400 10,000 47.000 Accounts Receivable 120,000 130,000 60.000 65.000 Interest and Other Receivables 40,000 45,000 8,000 10,000 Inventory 100,000 140,000 50.000 50,000 Land 50,000 50,000 22.000 22.000 Buildings and Equipment 400.000 400,000 240.000 240,000 Accumulated Depreciation (150,000) (185,000) (70,000) (94,000) Investment in Skate Company Stock 211,000 224,000 Investment in Tin Co. Bonds 135.000 134,000 Total Assets 946,400 1,006,400 320,000 340,000 Accounts Payable 60.000 65.000 16.500 11.000 Interest and Other Payables 40,000 45,000 7,000 12.000 Bonds Payable 300,000 300,000 100.000 100,000 Bond Discount (3,500) (3.000) Common Stock 150,000 150,000 30,000 30.000 Additional Paid-In Capital 155.000 155,000 20.000 20,000 Retained Earnings 241,400 291.400 150,000 170,000 Total Liabilities and Equities 946,400 1,006.400 320,000 340.000