On January 1, 2023, Porter Company purchased an 80% interest in the capital stock of Salem Company

Question:

On January 1, 2023, Porter Company purchased an 80% interest in the capital stock of Salem Company for $850,000. At that time, Salem Company had capital stock of $550,000 and retained earnings of $80,000. Porter Company uses the partial equity method to record its investment in Salem Company. Differences between the fair value and the book value of the identifiable assets of Salem Company were as follows:

The book values of all other assets and liabilities of Salem Company were equal to their fair values on January 1, 2023. The equipment had a remaining life of five years on January 1, 2023. The inventory was sold in 2023. Salem Company’s net income and dividends declared in 2023 and 2024 were as follows:
Year 2023 Net Income of $100,000; Dividends Declared of $25,000
Year 2024 Net Income of $110,000; Dividends Declared of $35,000

Required:
A. Present the eliminating/adjusting entries needed on the consolidated worksheet for the year ended December 31, 2023. (It is not necessary to prepare the worksheet.)
B. Present the eliminating/adjusting entries needed on the consolidated worksheet for the year ended December 31, 2024. (It is not necessary to prepare the worksheet.)
Use the following financial data for 2025 for requirements C through G.

Required:
C. Although no goodwill impairment was reflected at the end of 2023 or 2024, the goodwill impairment test conducted at December 31, 2025 revealed implied goodwill from Salem to be only $150,000. The impairment has not been recorded in the books of the parent. Pre- pare a t- account calculation of the controlling and noncontrolling interests in consolidated income for the year ended December 31, 2025.
D. Prepare a consolidated financial statements workpaper for the year ended December 31, 2025.
E. Prepare a consolidated statement of financial position and a consolidated income statement for the year ended December 31, 2025.
F. Describe the effect on the consolidated balances if Salem Company uses the LIFO cost flow assumption in pricing its inventory and there has been no decrease in ending inventory quantities since 2024.
G. Prepare an analytical calculation of consolidated retained earnings for the year ended December 31, 2025.