Workpaper Entries for Three Years On January 1, 2003, Piper Company acquired an 80% interest in Sand Company for $2,276,000. At that time the capital stock and retained earnings of Sand Company were $1,800,000 and $700,000, respectively. Differences between the fair value and the book value of the identifiable assets of Sand Company were as follows: LO2 Fair Value in Excess of Book Value Inventory $ 45,000 Equipment (net) 50,000 The book values of all other assets and liabilities of Sand Company were equal to their fair values on January 1, 2003. The equipment had a remaining useful life of eight years.
Inventory is accounted for on a FIFO basis. Sand Company’s reported net income and declared dividends for 2003 through 2005 are shown here:
2003 2004 2005 Net Income $ 100,000 $ 150,000 $ 80,000 Dividends 20,000 30,000 15,000 Required:
Prepare the eliminating/adjusting entries needed on the consolidated worksheet for the years ended 2003, 2004, and 2005. (It is not necessary to prepare the worksheet.)
1. Assume the use of the cost method.
2. Assume the use of the partial equity method.
3. Assume the use of the complete equity method.