Consolidated Workpaper, Partially Owned Subsidiary—Subsequent Years On January 1, 1999, Plank Company purchased 80% of the outstanding capital stock of Scoba Company for $53,000. At that time, Scoba’s stockholders’ equity consisted of capital stock, $55,000; other contributed capital, $5,000; and retained earnings, $4,000. On December 31, 2003, the two companies’ trial balances were as follows: LO6 Plank Scoba Cash $ 42,000 $ 22,000 Accounts Receivable 21,000 17,000 Inventory 15,000 8,000 Investment in Scoba Company 61,000 Land 52,000 48,000 Dividends Declared 10,000 8,000 Cost of Goods Sold 85,400 20,000 Other Expense 10,000 12,000 $296,400 $135,000 Plank Scoba Accounts Payable $ 12,000 $ 6,000 Other Liabilities 5,000 4,000 Capital Stock 100,000 55,000 Other Contributed Capital 20,000 5,000 Retained Earnings, 1/1 40,000 15,000 Sales 105,000 50,000 Equity in Subsidiary Income 14,400 —0—
$296,400 $135,000 The accounts payable of Scoba Company include $3,000 payable to Plank Company.
Required:
A. What method is being used by Plank to account for its investment in Scoba Company?
How can you tell?
B. Prepare a consolidated statements workpaper at December 31, 2003. Any difference between cost and book value relates to subsidiary land.