C- On January 1, 2019 Porto Corporation paid $81,000 for a 90% interest in Sardinia Corporation. On that date Sardinia capital stock was $50,000 and its Retained Earnings was $15,000. Any excess will be assigned to goodwill.

Further information:

1. During 2019, Porto's sales to Sardinia were $24,000, Sardinia managed to sell 50% of this merchandise. (The other half was sold in 2020.) 2. During 2020, Porto's sales to Sardinia were $30,000 of which Sardinia managed to sell 40% of this merchandise. At year-end 2020, Sardinia owed Porto $7,500 for the inventory purchased during 2020. Porto sells merchandise to Sardinia at 120% of Porto's cost.

3. On January 1, 2020, Porto sold equipment with a book value of $10,000 and a remaining useful life of four years and no salvage value to Sardinia for $14,000. Straight-line depreciation is used.

4. Sardinia's income for 2019 was $20,000 and Sardinia's dividends received by Porto was $9,000

5. Separate company financial statements for Porto Corporation and Subsidiary at December 31, 2020 are summarized in the first two columns of the consolidation working papers.

Required: 1) Prepare all elimination entries in 2020 (Including the entries not affecting the consolidated Income statement). Show all your calculations. 2) Complete the working papers to consolidate the financial statements of Porto Corporation and subsidiary for the year ended December 31, 2020:

Porto Sardinia Consolidated Eliminations Debit Credit $ 300,000 $70,000 23,000 4,000 (130,000) (22,000) (140,000 (18,000) INCOME STATEMENT Sales Income from Sardinia Gain on equipment sale Cost of Sales Other Expenses Noncontrolling interest share Net income Retained Earnings 1/1 Add: Net income Dividends Retained Earnings 12/31 BALANCE SHEET Cash Receivables Inventories Equipment-net $ 57,000 $30,000 $ 47,500 $ 25,000 57,000 30,000 ( 35,000) ( 10,000) $ 69,500 $ 45,000 $ 27,500 $ 15,000 35,000 20,000 50,000 22,500 120,000 45,000 20,000 17,50 102,000 $ 354,500 $120,000 $ 35,000 $25,000 Investment in Sardinia Goodwill TOTAL ASSETS LIAB. & EQUITY Accounts payable Capital Stock Retained Earnings 1/1 Noncntrl. Interest 12/31 Noncntrl. Interest TOTAL LIAB.& EQUITIES 250,000 69,500 50,000 45,000 $ 354,500 $120,000 (24 Marks)