C- Penguin Corporation paid $16,200 for a 90% interest in Seagull Corporation on January 1, 2019, when Seagull stockholders' equity consisted of $10,000 Capital Stock and $3,000 of Retained Earnings. The excess cost over book value was attributable to goodwill.

Additional information:

1. All intercompany sales of inventory are made at 120% of cost. During 2019, Seagull 's sales to Penguin were $4,800, of which half of the merchandise remained in Penguin 's inventory at December 31, 2019. (The 2019 ending inventory was sold in 2020.) During 2020, Penguin's sales to Seagull were $6,000 of which 60% remained in Seagull's inventory at December 31, 2020. At year-end 2020, Seagull owed Penguin $1,500 for the inventory purchased during 2020.

2. Penguin Corporation sold equipment with a book value of $2,000 and a remaining useful life of four years and no salvage value to Seagull Corporation on January 1, 2020 for $2,800. Straight-line depreciation is used.

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

4. The following information is available for 2019:

Seagull's income $4,000 - Seagull's dividends received by Penguin $1,800

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 Penguin Corporation and subsidiary for the year ended December 31, 2020.

Penguin Seagull Eliminations Consolidated Debit Credit INCOME STATEMENT Sales $60,000 $14,000 3,920 800 (26,000) (4.400) income from Seagull Gain on equipment sale Cost of Sales Other Expenses Noncontrolling interest share Net income Retained Earnings 1/1 (28,000) (3,600) $10,720 $6,000 $ 9,500 $5,000 B326 FTHE VI Page 5 of 6 Summer 2020-2021 10,720 6,000 Add: Net income Dividends Retained Earnings 12/31 (7,000) (2.000) $9,000 $ 13,220 BALANCE SHEET Cash $5,500 $3,000 7,000 4,000 10,000 4,500 24,000 9,000 4,000 3,500 19,800 $70,300 $24,000 Receivables Inventories Equipment-net Land Investment in Seagull Goodwill TOTAL ASSETS LIAB. & EQUITY Accounts payable Capital Stock Retained Earnings 1/1 Noncntrl. Interest 12/31 Noncntrl. Interest TOTAL LIAB. & EQUITIES $7,080 $5,000 50,000 10,000 13,220 9,000 $24,000 $ 70,300 (24 Marks)