Prime Company holds 80 percent of the stock of Lane Company, acquired on January 1, 20X2, for \(\$ 160,000\). On the date of acquisition, Lane reported retained earnings of \(\$ 50,000\) and had \(\$ 100,000\) of common stock outstanding. Prime uses the basic equity method in accounting for its investment in Lane.

Trial balance data for the two companies on December 31, 20X6, are as follows:

1. At the date of combination, the book values and fair values of all separably identifiable assets of Lane Company were the same. At December 31, 20X6, the management of Prime Company reviewed the amount attributed to goodwill as a result of its purchase of Lane Company stock and concluded an impairment loss of \(\$ 25,000\) should be recognized in 20X6.
2. On January 1, 20X5, Lane Company sold land that had cost \(\$ 8,000\) to Prime Company for \(\$ 18,000\)
3. On January 1, 20X6, Prime Company sold to Lane Company equipment that it had purchased for \(\$ 75,000\) on January 1, 20X1. The equipment has a total economic life of 15 years and was sold to Lane Company for \(\$ 70,000\). Both companies use straight-line depreciation.
4. There was \(\$ 7,000\) of intercompany receivables and payables on December 31, 20X6.
\section*{Required}

a. Give all eliminating entries needed to prepare a consolidation workpaper for 20X6.

b. Prepare a three-part workpaper for 20X6, in good form.

c. Prepare a consolidated balance sheet, income statement, and retained earnings statement for 20X6.

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Prime Company Item Debit Credit Lane Company Debit Credit Cash and Accounts Receivable $ 113,000 $ 35,000 Inventory 260,000 90,000 Land 80,000 80.000 Buildings and Equipment 500,000 150,000 Investment in Lane Company Stock 232,000 Cost of Goods Sold 140,000 60,000 Depreciation and Amortization 25.000 15,000 Other Expenses 15.000 5,000 Dividends Declared 30,000 5,000 Accumulated Depreciation $ 205.000 $ 45,000 Accounts Payable Bonds Payable 60.000 20,000 200.000 50,000 Common Stock Retained Earnings Sales 300,000 100,000 338,000 105.000 240,000 120,000 Gain on Sale of Equipment 20,000 Income from Subsidiary 32,000 Total $1.395.000 $1.395.000 $440.000 $440,000