11-12b

Palermo Inc. purchased 80 percent of the outstanding stock of Salina Ranching Company, Iocated in Australla, on January 1, 20X3. The purchase price in Australian dollars (AS) was A $200,000, and A$40,000 of the differentlal was allocated to plant and equipment, which Is amortized over a 10-year perlod. The remainder of the differentlal was attributable to a patent. Palermo Inc. amortizes the patent over 10 years. Salina Ranching's trial balance on December 31, 20X3, In Australlan dollars Is as follows: Assume that the U.S. dollar is the functional currency and that Palermo uses the fully adjusted equity method for accounting for its Investment In Salina Ranching. A December 31, 20X3, trlal balance for Palermo follows. Additional Information: 1. Salina Ranching uses average cost for cost of goods sold. Inventory Increased by A\$20,000 during the year. Purchases were made unlformly during 203. The ending inventory was acquired at the average exchange rate for the year. 2. Plant and equipment were acquired as follows: 3. Plant and equipment are depreclated using the straight-Iine method and a 10-year life with no residual value. 4. The payable to Palermo is in Australlan dollars. Palermo's books show a recelvable from Salina Ranching of \$6,480. 5. The 10-year bonds were Issued on July 1, 20X3, for A\$106,000. The premlum is amortized on a straight-line basis. The Interest is paid on April 1 and October 1. 6. The dlvidends were declared and paid on April 1. 7. Exchange rates were as follows: b. Prepare a three-part consolidation worksheet as of December 31, 20X3. (Values in the first two columns (the "parent" and "subsidlary" balances) that are to be deducted should be indicated with a minus sign, while all values in the "Consolidation Entrles" columns should be entered as positive values. For accounts where multiple adjusting entrles are required, combine all debit entrles into one amount and enter this amount in the debit column of the worksheet. Similarly. combine all credit entries into Required: a. Prepare a set of consolidation entrles, In general journal form, for the entries required to prepare a three-part consolidatlon worksheet as of December 31, 20X3. (If no entry is required for a transaction/event, select "No journal entry required" in the account field.) \begin{tabular}{|l|l|} \hline A Record the basic consolidation entry. \\ \hline a Record the amortized excess value reclassification entry. \\ Record the excess value (differential) reclassification \\ entry. \\ Record the elimination of the intercompany accounts. \end{tabular}