Mini-Comprehensive — Purchased Subsidiary Consolidation Worksheet: Year of Equipment Trans¬

fer — Upstream (80% ownership) On 1/1/05, Puta Inc. purchased 80% of Suta Inc.’s outstanding common stock for $184,000 cash. At that date, Suta had (1) a book value of $175,000 ($100,000 common stock + $75,000 retained earnings) and (2) land that was undervalued by $10,000. On 1/3/05, Suta sold equipment to Puta. Information related to the sale follows:

Sales Cost . price .

Less — Accumulated depreciation Loss .

$ 18,000 $ 98,000 (56,000) 42,000

$(24,000)

Original life used by subsidiary . 7 years Remaining life assigned by Puta . 6 years Comparative condensed financial statements follow:

Income Statement (2006)

Sales Cost Expenses of

.

sales

.

.

Intercompany Accounts Equity in net income (of Suta) .

Intercompany Net Income loss

.

.

Balance Sheet (as of 12/31/05)

Investment Accumulated Other Buildings assets and in

.

depreciation equipment subsidiary .

.

.

Total Assets .

Common Liabilities Retained Total stock Liabilities earnings

.

.

.

and Equity .

Dividends declared .

Puta Inc. Suta Inc.

$ 625,000 (210,000)

(180,000)

S 299,000 (140,000)

(70,000)

40,000

(24,000)

$ 275,000 $ 65,000

$ 188,000 390,000

(80,000) 202,000

$ 180,000

(120,000)'

215,000

$ 700,000 $ 275,000

$ 280,000 200,000 220,000

$ 80,000 100,000 95,000

$ 700,000 $ 275,000

$ 150,000 $ 45,000

’ The balance was $110,000 at the acquisition date.

Neither entity made any general ledger adjustment for unrealized intercompany loss at the end of 2005.

1. Determine the unrealized loss at the end of 2005. {For Module 1 only: Also make the necessary year-end adjusting entry for the unrealized loss required for this module; adjust the statements accordingly.) Prepare an analysis of the Investment account for 2005.

2. Prepare all consolidation entries as of 12/31/05.

3. Prepare a consolidation worksheet at 12/31/05.