Consolidation Worksheet: Year of Equipment Transfer — Upstream (75% ownership) Several years ago, Pak Inc. created a 75%-owned subsidiary, Shipp Inc. The public acquired the remain¬

ing 25% ownership interest on the creation date. On 1/3/05, Shipp sold equipment to Pak. Infor¬

mation related to the sale follows:

Sales Cost Less Gain

—

.

price Accumulated

.

.

depreciation .

Original Remaining life life used assigned by subsidiary by Pak

.

.

Comparative condensed financial statements follow:

$ 25,000

(15,000)

Pak Inc.

$22,000 10,000

$12,000 5 years 3 years Shipp Inc.

Income Statement (2005)

Sales Cost Expenses of

.

sales

.

.

Intercompany Accounts Equity in net income (of Shipp) .

Intercompany Net Income gain

.

.

Balance Sheet (as of 12/31/05)

Investment Buildings and in equipment subsidiary Accumulated Other assets .

depreciation .

Total Assets .

Common Liabilities Retained Total stock Liabilities earnings and Equity .

$ 520,000 (210,000)

(93,000)

$168,000 (80,000)

(40,000)

45,000 12,000

$ 262,000

$ 60,000

$ 135,000 130,000

(40,000) 275,000 $ 44,000 (14,000)

165,000

$ 500,000 $195,000

$ 200,000 75,000 225,000

$ 15,000 100,000 80,000

$ 500,000 $195,000

$ 135,000

$ 20,000 1. Calculate the unrealized intercompany gain at the end of 2006. {For Module 1 only: Make the necessary year-end g/l adjusting entry for the unrealized gain required for this module; adjust the statements accordingly.) Prepare an analysis of the investment account for 2006.
2. Prepare all consolidation entries as of 12/31/06.
3. Prepare a consolidation worksheet at 12/31/06.