On January 1, 1990, Northwood Company purchased \(80 \%\) of Souther Company's outstanding stock at \(\$ 48\) per share. On that date, Northwood Company had retained earnings of \(\$ 517,500\). Souther Company had retained earnings of \(\$ 135,000\), and had outstanding 15,000 shares of \(\$ 15\) par, common stock, originally issued at par.

\section*{Part 1.}

\section*{Required}

1. Give the elimination entry to be used on a work sheet for a consolidated balance sheet dated January 1, 1990 .

2. Determine the amount of consolidated retained earnings that should be shown on a consolidated balance sheet dated January 1, 1990.

Part 2. During the year ended December 31, 1990, Northwood Company paid cash dividends of \(\$ 67,500\) and earned net income of \(\$ 127,500\) excluding earnings from its investment in Souther Company. Souther Company earned net income of \(\$ 63,000\) and paid dividends of \(\$ 30,000\). Except for Northwood Company's Retained Earnings account and the Investment in Souther Company account, the balance sheet accounts for the two companies on December 31, 1990, are as follows:

Northwood Company loaned \(\$ 54,000\) to Souther Company during 1990, for which Souther Company signed a note. On December 31, 1990, the note had not been repaid.
\section*{Required}
1. Calculate the December 31, 1990, balances in Northwood Company's Investment in Souther Company account and Retained Earnings account.
2. Complete a work sheet to consolidate the balance sheets of the two companies.

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Northwood Souther Company Company Cash.. Notes receivable Merchandise $157,800 $124,200 54,000 367,200 178,200 Building (net) 348,000 216,000 Land Investment in Souther Company. Total assets. Accounts payable 210,000 189,000 ? $ ? $707,400 $439,500 $260,400 Note payable. Common stock 54,000 672,000 225,000 Retained earnings ? 168,000 Total liabilities and stockholders' equity. $ ? $707,400