Prout Company owns 80% of the common stock of Sexton Company. The stock was purchased for $1,600,000
Question:
Prout Company owns 80% of the common stock of Sexton Company. The stock was purchased for $1,600,000 on January 1, 2022, when Sexton Company’s retained earnings were $800,000. On January 1, 2024, Prout Company sold fixed assets to Sexton Company for $360,000. These assets were originally purchased by Prout Company for $400,000 on January 1, 2014, at which time their estimated depreciable life was 25 years. The straight- line method of depreciation is used. On December 31, 2025, the trial balances of the two companies were as shown here:
Required:
A. Prepare a consolidated statements workpaper for the year ended December 31, 2025.
B. Assuming that on January 1, 2026, Sexton Company sells the fixed assets purchased from Prout Company to a party outside the affiliated group for $300,000:
(1) Prepare the entry that would have been entered on the books of Sexton Company to record the sale.
(2) Prepare entries for the December 31, 2026, consolidated statements workpaper necessitated by the sale of the assets.
(3) Prepare any workpaper entries that will be needed in the December 31, 2026, consolidated statements workpaper in regard to these fixed assets.
Step by Step Answer:
Part A Income Statement Sales Equity in Subsidiary Income Total Revenue Cost of Goods Sold Income Tax Expense Other Expenses Total Cost Expenses Net Consolidated Income Noncontrolling Interest Income ...View the full answer
