Penn Corporation purchased 80 percent ownership of ENC Company on January 1, 20X2, at underlying book value. On January 1, 20X4, Penn Corporation sold 2,000 shares of ENC Company stock for \(\$ 60,000\) to American School Products. Trial balances for the companies on December 31, \(20 \times 4\), contain the following data:

ENC Company net income was earned evenly throughout the year. Both companies declared and paid their dividends on December 31, 20X4. Penn Corporation uses the basic equity method in accounting for its investment in ENC Company.

\section*{Required}

a. Prepare the elimination entries needed to complete a full consolidation workpaper for \(20 \mathrm{X} 4\).

b. Prepare a consolidation workpaper for 20X4.

Transcribed Image Text:

Penn Corporation Debit Credit ENC Company Debit Credit Cash $ 30.000 $ 35,000 Accounts Receivable 70,000 50,000 Inventory 120,000 100,000 Buildings and Equipment 650,000 230,000 Investment in ENC Company 162.000 Cost of Goods Sold 210.000 100,000 Depreciation Expense Other Expenses Dividends Declared Accumulated Depreciation Accounts Payable Bonds Payable Common Stock ($10 par) Additional Paid-In Capital Retained Earnings Sales Gain on Sale of ENC Company Stock Income from Subsidiary 20,000 15,000 21.000 25,000 15,000 10,000 $ 170.000 50,000 $ 95,000 20.000 200,000 200.000 50.000 320,000 280,000 30.000 100.000 20.000 130.000 170,000 10.000 18,000 Total $1,298,000 $1.298.000 $565,000 $565.000