Correction: On July 1, year 1 Company S acquires 80% of Company S is incorrect.

It should be On July 1, year 1 Company S acquires 80% of Company P

Problem #4 Here is the December 31, Year 0 balance sheet for Company S. Company S balance sheet . December 31, Year 0 Cash $ 320,000 Accounts payable Accounts receivable 480,000 Long-term debt Inventory 400,000 Total liabilities Equipment 1,000,000 Common stock + APIC Accumulated depreciation (200,000) Retained earnings Total assets $ 2,000,000 Total stockholders equity Total L + SE $ 220,000 500,000 720,000 400,000 880,000 1,280,000 $ 2,000,000 On July 1, Year 1, Company S acquires (for cash) 80% of the outstanding shares of Company S. On that date, the fair values of all of Company S's individual assets and liabilities equaled their book values. No differential resulted from this acquisition. Company S's accumulated depreciation on July 1, Year I was $240,000. Here is the December 31, Year 1 pre-closing trial balance for Company S. Cash Accounts receivable Inventory Equipment Accumulated depreciation Accounts payable Long-term liabilities Common stock + APIC Retained earnings Dividends declared Sales Cost of goods sold Operating expenses Company S Dr. Cr. 540,000 460,000 520,000 1,100,000 300,000 240,000 500,000 400,000 880,000 200,000 2,800,000 1,860,000 440,000 5,120,000 5,120,000 During July 1, Year 1 through December 31, Year 1: Company S reports sales of 1,600,000, cost of goods sold of $1,140,000, and operating expenses of $160,000. Company S declares dividends of $120,000. [4.1How much did Company P pay to acquire its 80% interest in Company S? [4.2] Prepare Company P's equity method journal entries for Year 1. [4.3] Prepare all consolidation entries necessary to prepare the Year 1 consolidated financial statements