1. Prepare the related journal entries and the consolidated financial statements (balance sheet, income statement, retained earnings) using the 3-part worksheet format for December 31, 2019. In an Excel spreadsheet, show your calculations for each of the related accounts. For example, you can have a tab for goodwill impairment calculation, a tab for inventory transfer, another tab for equipment, and so on.

Project Detailed Information:

Pipe Manufacturing Company acquired 90 percent of Spike Corporation's outstanding common stock on December 31, 2017, for $2,595,240. At the date of acquisition, the fair value of the noncontrolling interest was $288,360 and Spike reported common stock outstanding of $1,161,000, premium on common stock of $384,912, and retained earnings of $777,600. The book values and fair values of Spike's assets and liabilities were equal, except for land, which was worth $255,312 more than its book value.

Since the date it was acquired by Pipe Manufacturing, Spike has sold inventory on account to Pipe on a regular basis. The amount of such intercompany sales totaled $223,236 in 2018 and $394,632 in 2019; the gross profit was 42 percent in both years. All inventory transferred in 2018 had been sold by December 31, 2018, except inventory which Pipe paid $46,980 and did not resell until January 2019. All 2018 inventory transactions on account had been satisfied prior to the end of the year. Inventory transferred in 2019 had been resold at December 31, 2019, except merchandise for which Pipe had paid $89,640. An account balance of $50,760 remained unpaid on 2019 inventory transactions.

On January 1, 2018, Spike sold equipment to Pipe for $243,000. Spike had purchased the equipment for $400,680 on January 1, 2016 and was depreciating it on a straight-line basis with a 10-year expected life and no anticipated salvage value. The equipment's total expected life is unchanged as a result of the intercompany sale. Spike reported $50,000 net income for 2018 but declared no dividends.

As of December 31, 2019, Spike had declared fourth-quarter dividend; however 25% of the declared amount had not been paid out. Both Pipe and Spike use straight-line depreciation and amortization. On December 31, 2019, Pipe's management determined that the carrying value of the reporting unit to which goodwill is assigned is $2,014,200, and the fair value of the reporting unit is $1,835,638. Goodwill impairments, if any, should be shared proportionately between controlling and noncontrolling interests. Pipe uses the basic equity method to account for its investment in Spike.

As a staff of the financial reporting team, your task is to prepare the consolidated financial statements for December 31, 2019.

At December 31, 2019, trial balance for Pipe and Spike appeared as follows:

Pipe Manufacturing Spike Corporation

Item Debit Credit Debit Credit

Cash 2,685,258 309,258

Current Receivables 158,004 266,258

Inventory 288,360 428,220

Investment in Spike Stock 2,923,694 -

Land 2,012,580 969,322

Building and Equipment 3,526,200 2,177,658

Cost of Goods Sold 3,970,652 918,146

Depreciation and Amortization 288,360 320,220

Other Expenses 911,142 331,938

Dividends Declared 135,000 394,200

Accumulated Depreciation 1,775,336 1,042,578

Current Payables 121,751 261,623

Bonds Payable 432,000 -

Common Stock 1,821,096 1,161,000

Premium on Common Stock 1,765,832 384,912

Retained Earnings, January 1 3,268,080 827,600

Sales 6,864,912 2,239,380

Other Income 255,315 198,126

Income from Subsidiary 594,927 -

Total 16,899,250 16,899,250 6,115,219 6,115,219

*Small differences, if any, are due to rounding.