Pastel Corporation acquired controlling interest of Somber Corporation in 20X5 at underlying book value. In preparing a

Question:

Pastel Corporation acquired controlling interest of Somber Corporation in 20X5 at underlying book value. In preparing a consolidated balance sheet workpaper at January 1, 20X9, the controller of Pastel Corporation included the following eliminating entry:

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In a note at the bottom of the consolidation workpaper at January 1, 20X9, it is indicated the equipment was purchased from a nonaffiliate on January 1, 20X1, for $\$ 120,000$ and was sold to an affiliate on December 31, 20X8. The equipment is being depreciated on a straight-line basis over 15 years. Somber reported stock outstanding of $\$ 300,000$ and retained earnings of $\$ 200,000$ at January 1, 20X9. Somber reported net income of $\$ 25,000$ and paid dividends of $\$ 6,000$ for $20 \mathrm{X} 9$.
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a. What percentage ownership of Somber Corporation is held by Pastel?

b. Was the parent or subsidiary the owner prior to the intercorporate sale of equipment? Explain.

c. What was the intercompany transfer price of the equipment on December 31, 20X8?

d. What amount of income will be assigned to the noncontrolling interest in the consolidated income statement for $20 \times 9$ ?

e. Assuming Pastel and Somber report depreciation expense of $\$ 15,000$ and $\$ 9,000$, respectively, for $20 \mathrm{X} 9$, what amount of depreciation will be reported in the consolidated income statement for 20X9?

f. Give all eliminating entries needed at December 31, 20X9, to prepare a complete set of consolidated financial statements.

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