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problem 8-6 (LO 4) Worksheet, direct and indirect holding, intercompany merchandise, machine. The following diagram depicts the relationships among Mary Company, John Company, and Joan Company on December 31, 2014: Mary Owns 60% John Owns 40% Joan Owns 50% Mary Company purchases its interest in John Company on January 1, 2012, for $204,000. John Company purchases its interest in Joan Company on January 1, 2013, for $75,000. Mary Company purchases its interest in Joan Company on January 1, 2014, for $72,000. All investments are accounted for under the equity method. Control over Joan Company does not occur until the January 1, 2014, acquisition. Thus, a D&D schedule will be prepared for the investment in Joan as of January 1, 2014. The following stockholders' equities are available: John Joan Company December31 , December 31 2011 2012 2013 Commonstock ($10par). ........... ............ $150,000 Commonstock ($10par). ........... ............ $100,000 Paid-incapitalinexcess of par ............. ..... Retained earnings ............................. 80,000 Totalequity ......... ........... ............ $180,000 $100,000 75,000 75,000 $300,000 50,000 $150,000 On January 2, 2014, Joan Company sells a machine to Mary Company for $20,000. The machine has a book value of $10,000, with an estimated life of ve years and is being depreciated on a straight-line basis. John Company sells $20,000 of merchandise to Joan Company during 2014 to realize a gross prot of 30%. Of this merchandise, $5,000 remains in Joan Company's December 31, 2014, inventory. Joan owes John $3,000 on December 31, 2014, for merchandise delivered during 2014. Trial balances of the three companies prepared from general ledger account balances on December 31, 2014, are as follows: Mary John Joan Cash ...................... ........... ...... 30,000 62,500 60,000 Accounts Receivable ........................... 200,000 30,000 55,000 Inventory ................... ........... ...... 50,000 80,000 360,000 Investmentin JohnCompany........... ........ 270,000 Investmentin JoanCompany........... .......... 86,000 107,500 Property, Plant,andEquipment.... ........... ...2,250,000 350,000 850,000 Accumulated Depreciation ....... ........... .... (938,000) (121,800 (377,500) Mary John Joan Intangibles.... ........... ........... ......... 15,000 Accounts Payable ............... ........... ... (215,500) (22,000) (61,000) AccruedExpenses............... ........... ... (12,000) (1,200) (4,000) BondsPayable. ........... ........... ......... (100,000) (300,000) (500,000) Common Stock($5par) ........................ (500,000) Common Stock($10par) ....................... (150,000) Common Stock($10par) ....................... (100,000) Paid-In Capital inExcessof Par ...... ........... (700,000) (75,000) RetainedEarnings, January1, 2014........ . (290,000) (80,000) (130,000) Sales .. ........... .......................... (300,000) Gainon SaleofEquipment ......... ........... .. SubsidiaryIncome............... ........... ... (1,800,000) (500,000) (10,000) (58,000) CostofGoods Sold .............. ........... ... 350,000 180,000 1,170,000 OtherExpenses ................. ........... ... 100,000 90,000 525,000 (20,000) Dividends Declared.............. ........... ... 5,000 Totals ........... .......................... 0 0 75,000 15,000 0 Prepare the worksheet necessary to produce the consolidated nancial statements of Mary Company and its subsidiaries as of December 31, 2014. Include the determination and distribution of excess and income distribution schedules. Any excess of cost is assumed to be attributable to goodwill