Additional information:

1) Western acquired its 40% interest in Mustangs for $352,000 in 2015, when Mustangs retained earnings were $170,000 and common shares were $450,000. The acquisition differential on that date was fully amortized by the end of 2019.

2) In 2018, Western sold land to Mustangs and recorded a gain of $60,000 on the transaction. The land is still being used by Mustangs.

3) The December 31, 2019, inventory for Western contained a profit recorded by Mustangs amounting to $35,000.

4) On December 31, 2019, Mustangs owes Western $29,000.

5) Western has used the cost method to account for its investment in Mustangs.

6) Both companies have a 40% income tax rate.

REQUIRED:

Prepare the consolidated balance sheet for Western as at December 31, 2019, in accordance with GAAP, assuming that the investment in Mustangs is a joint venture investment and is reported using proportionate consolidation. (proportionately adjusted financial statements)

a) Calculate acquisition differential at acquisition date

b) Summarize Intercompany Eliminations and Gains/Losses

c) Prepare a balance sheet at December 31, 2019

The following balance sheets have been prepared as at December 31, 2019, for Western Corp. and Mustangs Co. Ltd. Western Mustangs Cash $ 68,000 30,000 Accounts Receivable 80,000 170,000 Inventory 600,000 400,000 Property and plant (net) 1,400,000 900,000 Investments in Mustangs 352,000 $2,500,000 $1,500,000 Current liabilities Bonds payable Common Shares Retained earnings $ 400,000 500,000 900,000 700,000 $2,500,000 $ 150,000 600,000 450,000 300,000 $1,500,000