1. Pretzel Corporation acquired an 80% interest in Salt Corporation at a cost equal to 80% of the book value of Salts net assets several years ago. At the time of purchase, the fair value and book value of Salts assets and liabilities were equal. Pretzel purchases its entire inventory from Salt at 150% of Salts cost. During 2011, Salts sales to Pretzel were $190,000. Pretzels beginning and ending inventories for 2011 were $72,000 and $66,000, respectively. Income statement information for both companies for 2011 is as follows: Pretzel Salt Sales revenue 820,000 440,000 Investment income from Salt 145,600 Cost of goods sold (460,000) (165,000) Expenses (120,000) (95,000) Net income 385,600 180,000 Required: prepare a consolidated income statement for Pretzel Corporation and Subsidiary for 2011 and record the three eliminating entries. (Format should follow that of P 5-1 and P 5-2) 2. Pauley Corporation paid $24,800 for an 80% interest in Shore Corporation on January 1, 2010, at which time Shores stockholders equity consisted of $15,000 of Common Stock and $6,000 Retained Earnings. The fair values of Shore Corporations assets and liabilities were identical to recorded book values when Pauley acquired its 80% interest. Shore Corporation reported net income of $4,000 and paid dividends of $2,000 during 2010. Pauley Corporation sold inventory items to Sergio during 2010 and 2011 as follows: 2010 2011 Pauleys sales to Shore 5,000 6,000 Pauleys cost of sales to Shore 3,000 3,500 Unrealized profit at year-end 1,000 1,500 At December 31, 2011, the accounts payable of Shore included $1,500 owed to Pauley. Required: complete the consolidation working papers for Pauley Corporation and Subsidiary for the year ended December 31, 2011. On a separate page, list the adjusting and elimination entries. (Format should follow P 5-6 and P 5-7) Also, prepare a T-account for the Investment in Sub and the Noncontrolling Interest with the 12/31/2010 and 12/31/2011 balances.