5 PELT CO & SLEET CO. SECOND YEAR - AFTER ACQUISITION The financial statement of the two companies for the Year 200X (Second Year) were as follows: A BALANCE SHEET Cash Accounts receivable Inventories Land Plant & equipment Investment in Sleet Co. PELT CO. 390,000 450,000 330,000 150,000 384,000 900,000 SLEET CO. 108,000 240,000 150,000 120,000 192,000 0 Total assets 2,604,000 810,000 C/S Accounts payable Ordinary shares, P 10 par Retained earnings MINAS 270,000 600,000 1,734,000 0 105,000 150,000 555,000 0 Total liabilities & equity 2,604,000 810,000 B INCOME STATEMENT Sales Cost of sales 1,758,000 756,000 750,000 300,000 Gross income Dividend income 1,002,000 30,000 450,000 0 Total income Operating expenses 1,032,000 594,000 450,000 330,000 NET INCOME 438,000 120,000 SECOND YEAR C RETAINED EARNINGS STATEMENT Retained earnings, Jan 1, XXX Add: Net income 1,446,000 438,000 1,884,000 150,000 472,500 120,000 592,500 37,500 Less Dividends Retained earnings, Dec 31, XXX 1,734,000 555,000 PELT & SLEET COMPANIES SECOND YEAR - AFTER ACQUISITION REQUIRED: A Journal entry on PELT Company's Books during Year 2 8 Compute Cost Book Value Differential to facilitate Working Paper preparation Refer to 1st Year C Compute the Consolidated Net Income Dec 31, Year 2 End of Second Year ESI MINI Share in Subsidiary Income Adjustments: Increase in Cost of goods sold Increase in Depreciation Add: Parent'd own Net Income CONSOLIDATED NET INCOME