Intercompany Bond Holdings at Par, 90% Owned Subsidiary Balance sheets for P Company and S Company on August 1, 2004, are as follows: LO7 Cash Receivables Inventory Investment in Bonds Investment in S Company Stock Plant and Equipment (net)
Land Total Accounts Payable Accrued Expenses Bonds Payable, 8%
Common Stock Other Contributed Capital Retained Earnings Total P Company S Company $ 165,500 $106,000 366,000 126,000 261,000 108,000 306,000 —0—
586,500 —0—
573,000 320,000 200,000 300,000 $2,458,000 $960,000 $ 174,000 $ 58,000 32,400 26,000 —0— 200,000 1,500,000 460,000 260,000 60,000 491,600 156,000 $2,458,000 $960,000 Required:
Prepare a workpaper for a consolidated balance sheet for P Company and its subsidiary on August 1, 2004, taking into consideration the following:
1. P Company acquired 90% of the outstanding common stock of S Company on August 1, 2004, for a cash payment of $586,500.
2. Included in the Investment in Bonds account are $40,000 par value of S Company bonds payable that were purchased at par by P Company in 1995. The bonds pay interest on April 30 and October 31. S Company has appropriately accrued interest expense on August 1, 2004; P Company, however, inadvertently failed to accrue interest income on the S Company bonds.
3. Included in P Company receivables is a $35,000 cash advance to S Company that was mailed on August 1, 2004. S Company had not yet received the advance at the time of the preparation of its August 1, 2004, balance sheet.
4. Any difference between the cost of the investment and the book value of equity acquired relates to subsidiary land.