18.

Required: a. Prepare a reconciliation between the balance in Prime's Investment in Suspect Co. account reported on December 31, 20X7, and Suspect's book value. (Enter the proportion of stock held as a fraction (i.e., 0.75 ), not in percent.) Prime Company holds 80 percent of Suspect Company's stock, acquired on January 1,202, for $160,000. On the date of acquisition, Suspect reported retained earnings of $50,000 and $100,000 of common stock outstanding, and the fair value of the noncontrolling interest was $40,000. Prime uses the fully adjusted equity method in accounting for its investment in Suspect. Trial balance data for the two companies on December 31,207, are as follows: Additional Information 1. At the date of combination, the book values and fair values of Suspect's separately identifiable assets and liabilities were equal. The full amount of the increased value of the entity was attributed to goodwill. At December 31, 20X6, the management of Prime reviewed the amount attributed to goodwill as a result of its purchase of Suspect stock and recognized an impairment loss of $18,000. No further impairment occurred in 207. 2. On January 1,205, Suspect sold land for $18,000 that had cost $8,000 to Prime. 3. On January 1, 20X6, Prime sold to Suspect equipment that it had purchased for $75,000 on January 1,201. The equipment has a total 15-year economic life and was sold to Suspect for $70,000. Both companies use straight-line depreciation. 4. Intercompany receivables and payables total $4,000 on December 31,207. b-1. Prepare all worksheet consolidation entries needed as of December 31,207. (If no entry is required for a transaction/event select "No journal entry required" in the first account field.) Record the basic consolidation entry. B Record the excess value (differential) reclassification entry. C Record the entry to eliminate the gain on the sale of land. D Record the entry to eliminate the gain on equipment and Credit to correct the asset's basis. b-2. Complete a three-part consolidation worksheet for 207. (Values In the first two columns (the "parent" and "subsidlary" balances) that are to be deducted should be Indlcated with a minus sign, while all values in the "Consolldation Entrles" columns should be entered as positive values. For accounts where multiple adjusting entries are required, combine all debit entries Into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entrles into one amount and enter this amount in the credit column of the worksheet.)