c. Prepare a three-part consolidation worksheet as of December 31, 20X7. (Values in the first two columns (the "parent" and "subsidiary" balances) that are to be deducted should be indicated with a minus sign, while all values in the "Consolidation Entries" columns should be entered as positive values. For accounts where multiple adjusting entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet.)

Prince Corporation acquired 100 percent of Sword Company on January 1, 20X7, for $200,000. The trial balances for the two companies on December 31, 20X7, included the following amounts: Sword Company Debit Credit $ 36,000 62,000 120,000 31,000 168,000 Item Cash Accounts Receivable Inventory Land Buildings and Equipment Investment in Sword Company Cost of Goods Sold Depreciation Expense Other Expenses Dividends Declared Accumulated Depreciation Accounts Payable Mortgages Payable Common Stock Retained Earnings Sales Income from Sword Company Prince Corporation Debit Credit $ 93,000 57,000 176,000 91,000 491,000 245,000 491,000 25,000 62,000 52,000 $ 150,000 54,000 196,000 296,000 321,000 696,000 70,000 $1,783,000 $1,783,000 257,000 15,000 62,000 25,000 $ 75,000 20,000 132,000 48,000 94,000 407,000 $776,000 $776,000 Additional Information 1. On January 1, 20X7, Sword reported net assets with a book value of $142,000. A total of $25,000 of the acquisition price is applied to goodwill, which was not impaired in 20X7. 2. Sword's depreciable assets had an estimated economic life of 11 years on the date of combination. The difference between fair value and book value of tangible assets is related entirely to buildings and equipment. 3. Prince used the equity-method in accounting for its investment in Sword. 4. Detailed analysis of receivables and payables showed that Sword owed Prince $15,000 on December 31, 20X7. PRINCE CORPORATION AND SUBSIDIARY Consolidated Financial Statements Worksheet December 31, 20X7 Consolidation Entries Prince Sword Co DR CR Corp Consolidated Income Statement $ 407,000 $ Sales Less: COGS 1,103,000 (748,000) (257,000) 696,000 $ (491,000) (25,000) (62,000) 70,000 3,000 (15,000) (62,000) (43,000) (124,000) 3,000 0 73,000 76,000 $ 188,000 $ 73,000 $ $ 3,000 $ 188,000 Less: Depreciation expense Less: Other expenses Income from Sword Co. Net Income Statement of Retained Earnings Beginning balance Net income Less: Dividends declared $ $ 321,000 94,000 76,000 3,000 188,000 $ 321,000 188,000 (52,000) $ 457,000 94,000 $ 73,000 (25,000) 142,000 $ 25,000 28,000 (52,000) 457,000 $ $ 170,000 $ $ Ending Balance Balance Sheet Assets Cash $ 93,000 $ 36,000 $ 62,000 15,000 120,000 Accounts receivable Inventory Land Buildings & equipment Less: Accumulated depreciation Investment in Sword Co. Goodwill 57,000 176,000 91,000 491,000 (150,000) 245,000 OOOOOO 31,000 168,000 (75,000) 33,000 129,000 104,000 296,000 122,000 632,000 (168,000) (25,000) 25,000 1,115,000 60,000 3,000 270,000 X 60,000 25,000 118,000 o $ 1,003,000 $ 342,000 $ $ 348,000 $ $ 54,000 $ 20,000 $ Total Assets Liabilities & Equity Accounts payable Mortgages payable Common stock Retained earnings Total Liabilities & Equity 48,000 196,000 296,000 457,000 $ 1,003,000 132,000 48,000 142,000 342,000 74,000 328,000 296,000 457,000 1,155,000 170,000 218,000 28,000 28,000 $ $ $ $ Prince Corporation acquired 100 percent of Sword Company on January 1, 20X7, for $200,000. The trial balances for the two companies on December 31, 20X7, included the following amounts: Sword Company Debit Credit $ 36,000 62,000 120,000 31,000 168,000 Item Cash Accounts Receivable Inventory Land Buildings and Equipment Investment in Sword Company Cost of Goods Sold Depreciation Expense Other Expenses Dividends Declared Accumulated Depreciation Accounts Payable Mortgages Payable Common Stock Retained Earnings Sales Income from Sword Company Prince Corporation Debit Credit $ 93,000 57,000 176,000 91,000 491,000 245,000 491,000 25,000 62,000 52,000 $ 150,000 54,000 196,000 296,000 321,000 696,000 70,000 $1,783,000 $1,783,000 257,000 15,000 62,000 25,000 $ 75,000 20,000 132,000 48,000 94,000 407,000 $776,000 $776,000 Additional Information 1. On January 1, 20X7, Sword reported net assets with a book value of $142,000. A total of $25,000 of the acquisition price is applied to goodwill, which was not impaired in 20X7. 2. Sword's depreciable assets had an estimated economic life of 11 years on the date of combination. The difference between fair value and book value of tangible assets is related entirely to buildings and equipment. 3. Prince used the equity-method in accounting for its investment in Sword. 4. Detailed analysis of receivables and payables showed that Sword owed Prince $15,000 on December 31, 20X7. PRINCE CORPORATION AND SUBSIDIARY Consolidated Financial Statements Worksheet December 31, 20X7 Consolidation Entries Prince Sword Co DR CR Corp Consolidated Income Statement $ 407,000 $ Sales Less: COGS 1,103,000 (748,000) (257,000) 696,000 $ (491,000) (25,000) (62,000) 70,000 3,000 (15,000) (62,000) (43,000) (124,000) 3,000 0 73,000 76,000 $ 188,000 $ 73,000 $ $ 3,000 $ 188,000 Less: Depreciation expense Less: Other expenses Income from Sword Co. Net Income Statement of Retained Earnings Beginning balance Net income Less: Dividends declared $ $ 321,000 94,000 76,000 3,000 188,000 $ 321,000 188,000 (52,000) $ 457,000 94,000 $ 73,000 (25,000) 142,000 $ 25,000 28,000 (52,000) 457,000 $ $ 170,000 $ $ Ending Balance Balance Sheet Assets Cash $ 93,000 $ 36,000 $ 62,000 15,000 120,000 Accounts receivable Inventory Land Buildings & equipment Less: Accumulated depreciation Investment in Sword Co. Goodwill 57,000 176,000 91,000 491,000 (150,000) 245,000 OOOOOO 31,000 168,000 (75,000) 33,000 129,000 104,000 296,000 122,000 632,000 (168,000) (25,000) 25,000 1,115,000 60,000 3,000 270,000 X 60,000 25,000 118,000 o $ 1,003,000 $ 342,000 $ $ 348,000 $ $ 54,000 $ 20,000 $ Total Assets Liabilities & Equity Accounts payable Mortgages payable Common stock Retained earnings Total Liabilities & Equity 48,000 196,000 296,000 457,000 $ 1,003,000 132,000 48,000 142,000 342,000 74,000 328,000 296,000 457,000 1,155,000 170,000 218,000 28,000 28,000 $ $ $ $