Chapter 5

Proud Corporation acquired 80 percent of Spirited Company's voting stock on January 1, 20X3, at underlying book value. The fair value of the noncontrolling interest was equal to 20 percent of the book value of Spirited at that date. Assume that the accumulated depreciation on depreciable assets was $56,000 on the acquisition date. Proud uses the equity method in accounting for its ownership of Spirited. On December 31, 20X4, the trial balances of the two companies are as follows: Spirited Company Debit Credit $158,000 302,000 14,000 83,000 27,800 Item Current Assets Depreciable Assets Investment in Spirited Company Depreciation Expense Other Expenses Dividends Declared Accumulated Depreciation Current Liabilities Long-Term Debt Common Stock Retained Earnings Sales Income from Spirited Company Proud Corporation Debit Credit $ 237,000 502,000 146,560 24,000 147,000 51,000 $ 199,000 70,000 101,760 188,000 272,000 236,000 40,800 $1,107,560 $1,107,560 $ 84,000 50,000 142,800 95,000 65,000 148,000 $584,800 $584,800 Required: a. Prepare all consolidation entries required on December 31, 20X4, to prepare consolidated financial statements. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)