Upstream Workpaper—Partial Equity Method (Note: This is the same problem as Problem 6-7, but assuming the use of the partial equity method.)
Paque Corporation owns 90% of the common stock of Segal Company. The stock was purchased for $810,000 on January 1, 2000, when Segal Company’s retained earnings were $150,000. LO5 Financial data for 2004 are presented here:
Paque Corporation Segal Company Sales $1,650,000 $ 795,000 Equity in Subsidiary Income 64,125 Total Revenue Ae) 795,000 Cost of Goods Sold:
Beginning Inventory 225,000 165,000 Purchases 1,275,000 525,000 Cost of Goods Available 1,500,000 690,000 Less: Ending Inventory 210,000 172,500 Cost of Goods Sold 1,290,000 517,500 Other Expenses 310,500 206,250 Total Cost and Expense 1,600,500 723,750 Net Income $ 113,625 $ 71,250 1/1 Retained Earnings 838,500 180,000 Net Income 113,625 71,250 Dividends Declared (150,000) (60,000)
12/31 Retained Earnings $ 802,125 $ 191,250 Cash $ 93,000 75,000 Accounts Receivable 319,500 168,750 Inventory 210,000 172,500 Investment in Segal Company 847,125 Other Assets 750,000 630,000 Total Assets $2,219,625 $ 1,046,250 Accounts Payable $ 105,000 $ 45,000 Other Current Liabilities 112,500 60,000 Capital Stock 1,200,000 750,000 Retained Earnings 802,125 WA)
Total Liabilities and Equity $2,219,625 $1, 046,250.
The January 1, 2004, inventory of Paque Corporation includes $45,000 of profit recorded by Segal Company on 2003 sales. During 2004, Segal Company made intercompany sales of $300,000 with a markup of 20% of selling price. The ending inventory of Paque Corporation includes goods purchased in 2004 from Segal Company for $75,000. Paque Corporation uses the partial equity method to record its investment in Segal Company.
Required:
A. Prepare the consolidated statements workpaper for the year ended December 31, 2004.
B. Calculate consolidated retained earnings on December 31, 2004, using the analytical or t-account approach.

C. If you completed Problem 6-7, compare the consolidated balances obtained in requirement A with those obtained in Problem 6-7.