Pot Company acquired 65 percent of Seed Corporation’s voting common stock on June 20, 20X2, at underlying book value. At that date, the fair value of the noncontrolling interest was equal to 35 percent of the book value of Seed Corporation. The balance sheets and income statements for the companies at December 31, 20X4, are as follows:

Additional Information

1. Pot uses the modified equity method in accounting for its investment in Seed.

2. During 20X4, Pot charged Seed $24,000 for consulting services provided to Seed during the year. The services cost Pot $17,000.

3. On January 1, 20X4, Seed sold Pot a building for $13,200 above its carrying value on Seed’s books. The building had a 12-year remaining economic life at the time of transfer.

4. On June 14, 20X4, Pot sold land it had purchased for $3,000 to Seed for $7,000. Seed continued to hold the land at December 31, 20X4.

Required

a. Give all consolidation entries needed to prepare a full set of consolidated financial statements for 20X4.

b. Prepare a consolidation worksheet for 20X4.

c. Prepare the 20X4 consolidated balance sheet, income statement, and retained earnings statement.

Transcribed Image Text:

POT COMPANY AND SEED CORPORATION Balance Sheets December 31, 20X4 Item Cash Accounts Receivable Inventory Land Buildings & Equipment (net) Investment in Seed Corp. Total Assets Accounts Payable Bonds Payable Common Stock, $5 par value Retained Earnings Total Liabilities & Stockholders' Equity Pot Company $ 32,500 62,000 95,000 40,000 200,000 110,500 $540,000 $ 35,000 180,000 100,000 225,000 $540,000 Seed Corp. $ 22,000 37,000 71,000 15,000 125,000 $270,000 $ 20,000 80,000 60,000 110,000 $270,000