5-On January 1, 2020, Wondersome Company acquired a 70% interest in Philmore Company for a purchase price that was $240,000 over the book value of the Philmores Stockholders Equity on the acquisition date. Wondersome uses the cost method to account for its investment in Philmore. On the date of acquisition, Philmores retained earnings balance was $350,000. Wondersome assigned the acquisition-date AAP as follows:

AAP Items

Initial Fair Value

Useful Life (years)

PPE, net. 90,000 .....20

Patent 150,000.....,10

$350,000

Philmore sells inventory to Wondersome (upstream) which includes that inventory in products that it, ultimately, sells to customers outside of the controlled group. You have compiled the following data for the years ending 2022 and 2023:

2022.....2023

Transfer price for inventory sale

$94,500.... $70,000

Cost of goods sold

-64,500.....,,-45,000

Gross profit

$30,000.....$ 25,000

% inventory remaining

30%......20%

Gross profit deferred

$9,000....$5,000

EOY Receivable/Payable

$32,000....$29,500

The inventory not remaining at the end of the year has been sold outside of the controlled group.

The parent and the subsidiary report the following financial statements at December 31, 2023:

Income Statement

Wondersome.....Philmore

Sales

$2,400,000....$602,400

Cost of goods sold

-1,580,000.....-465,398

Gross Profit

820,000.... 137,002

Income (loss) from subsidiary

10,500

Operating expenses

-711,200...-56,000

Net income

$119,300.....$81,002

Statement of Retained Earnings

Wondersome.....Philmore

BOY Retained Earnings

$3,360,350...., $608,000

Net income

119,300....81,002

Dividends

-85,000.....-15,000

EOY Retained Earnings

$3,394,650.....$674,002

Balance Sheet

Wondersome.....Philmore

Assets:

Cash

$450,000.....$84,700

Accounts receivable

425,000......113,200

Inventory

654,000.....142,100

Investment in subsidiary

634,550

PPE, net

4,432,100......1,000,002

$6,595,650...... $1,340,002

Liabilities and Stockholders Equity:

Current Liabilities

$505,900..... $99,500

Long-term Liabilities

703,500.....250,000

Common Stock

402,000.......75,300

APIC

1,589,600......241,200

Retained Earnings

3,394,650 .....674,002

$6,595,650 ........$1,340,002

Required:

a. Compute the EOY noncontrolling interest equity balance

b. Prepare the consolidation journal entries.