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2) Individual statements of income and retained earnings for Company X and its 100% owned subsidiary Company Y for the year 2020 are: X Y

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2) Individual statements of income and retained earnings for Company X and its 100% owned subsidiary Company Y for the year 2020 are: X Y Sales Cost of goods sold Gross profit. Operating expenses: Income from operations.. Dividend income Net income $ 12,000 (8,200) 3,800 (2.900 900 80 $ 980 $ 4,000 (2,800) 1,200 (900) 300 $ 300 Dividends declared Increase in retained eamings. Retained eamings, 1/1/20 Retained earnings, 12/31/20.. (400) 580 1,600 $ 2,180 (80) 220 750 970 $ Additional Information: 1. Company X purchased 100% of Company Y's capital stock on January 2, 2020, for $1,250 (which was the book value of Company Y on that date); Company Y has not issued additional capital stock since its acquisition by Company X 2. Intercompany sales (from Company X to Company Y) during the year were $800, the cost of these sales to Company X was $540 3. On December 31, 2020, Company Y's inventory included $90 of inventory items pur- chased from Company X; the cost of these items to Company X was $60. 4. The S80 of dividend income reported by Company X dwing the year was received from its 100% owned subsidiary Company Y. 5. There were no other intercompany transactions during the year After preparing a consolidated statement of income and retained eamings for the year 2020, indicate whether the following statements are "True" or "False by circling your answers below (each answer is worth 2 points): A) T F Consolidated sales for the year 2020 are $15,200. B) TF Consolidated gross profit for the year 2020 is $4,740. C) TF Consolidated net income for the year 2020 is $1.170. D) T F The consolidated retained earnings balance at December 31, 2020, is $2,370. E) TF Dividends declared reported on the consolidated statement of income and re- tained earnings for the year 2020 are $480

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