(50 points) Jones Company acquired an 80% interest in Smith Company at the beginning of Year 1 for $161,000. The book value of the stock purchased was $140,000. In negotiating the purchase price, it was agreed that the market value was justified in exceeding the book value because of the strong foothold in the market established by a newly launched product, Instant Coffee. Competitive brands are now coming on the market, however, and management believes that the initial advantage gained by Smith's new product will be dissipated in the next five years. Any goodwill should be amortized over this period. During Year 1, Jones sold to Smith merchandise for $85,000 that cost $10,000, and 20% of these goods are still in Smith's ending inventory. Jones uses the cost method to account for its investment in Smith. Minority interest will reflect the legal method. Required: a. Complete the accompanying work sheet, supplying notes to explain the entries. b. Prepare a statement of consolidated net income showing minority interest.

JONES COMPANY Consolidating Work Sheet Year 1 End Jones Smith Eliminating Entries Consolidated Trial Balance Account Title ComanyCompanyDebits Credits 50,000 Inventory Investment in Smith Company Dividend Receivable From $100,000 161,000 Smith Company Other Assets Cost of Goods Sold Operating Expenses Income Taxes Dividends Paid- 2,400 242,600 313,400 135,200 18,400 150,000 121,600 30,200 7,200 15,000 dones Company Dividends Paid Smith Compa Liabilities Dividends Payable Sales Dividend Income Capital Stock- 6,000 41,000 3,000 (495,200) (181,000) ny 96,500 7,500 (4,800) (800,000) Jones Company Capital Stock- Smith Company Retained Earnings- Jones Company Retained Earnings- Smith Company (100,000) (84,000) Total 0