Dividends Declared Prime Company holds 80 percent of Suspect Company's stock, acquired on January 1, 20X2, for $174,000. On the acquisition date, the fair value of the noncontrolling interest was $43,500. Suspect reported retained earnings of $50,000 and had $100,000 of common stock outstanding. Prime uses the fully adjusted equity method in accounting for its investment in Suspect. Trial balance data for the two companies on December 31, 20X6, are as follows: Prime Company Suspect Company Item Debit Credit Debit Credit Cash & Accounts Receivable $ 129,000 $ 39,000 Inventory 273,000 86,000 Land 100,000 70,000 Buildings & Equipment 490,000 180,000 Investment in Suspect Co. 207,590 Cost of Goods Sold 145,000 82,800 Depreciation and Amortization Expense 24,500 18,000 13,000 8,000 30,000 5,000 Accumulated Depreciation $ 200,900 $ 54,000 Accounts Payable 52,000 22,000 Bonds Payable 170,000 60,000 Common Stock 300,000 100,000 Retained Earnings 396,340 72,800 Sales 250,000 180,000 Gain on Sale of Equipment 15,500 Income from Suspect Co. 27,350 Total $1,412,090 $1,412,090 $ 488,800 $ 488,800 Other Expenses Additional Information 1. At the date of combination, the book values and fair values of all separately identifiable assets and liabilities of Suspect were the same. At December 31, 20X6, the management of Prime reviewed the amount attributed to goodwill as a result of its purchase of Suspect stock and concluded an impairment loss of $19,575 should be recognized in 20X6 and shared proportionately between the controlling and noncontrolling shareholders. 2. On January 1, 20X5, Suspect sold land that had cost $8,000 to Prime for $18,000. 3. On January 1, 20X6, Prime sold to Suspect equipment that it had purchased for $75,000 on January 1, 20X1. The equipment has a total economic life of 15 years and was sold to Suspect for $65,500. Both companies use straight-line depreciation. 4. There was $6,500 of intercompany receivables and payables on December 31, 20X6. Required: a. Give all consolidation entries needed to prepare a consolidation worksheet for 20x6. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) view transaction list Consolidation Worksheet Entries Record the basic consolidation entry. Note: Enter debits before credits. Entry Accounts Debit Credit 1 Record entry Clear entry view consolidation entries b. Prepare a three-part worksheet for 20X6. (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.) Consolida ol 0 0 0 PRIME COMPANY AND SUBSIDIARY Consolidated Financial Statement Worksheet December 31, 20X6 Consolidation Entries Prime Suspect DR CR Co. Co. Income Statement Sales Gain on Sale of Equipment Less: COGS Less: Depr. & Amort. Expense Less: Other Expenses Less: Goodwill Impairment Loss Income from Suspect Co. Consolidated Net Income 0 0 0 NCI in Net Income Controlling Interest in NI 0 0 0 Statement of Retained Earnings Beginning Balance Net Income Less: Dividends Declared Ending Balance 0 0 0 Balance Sheet Cash and Accounts Receivable Inventory Land Buildings & Equipment Less: Accumulated Depreciation Investment in Suspect Co. Goodwill Total Assets 0 0 0 Accounts Payable Bonds Payable Common Stock Retained Earnings NCI in NA of Suspect Co. Total Liabilities & Equity 01 0 0 0 0 0 0 01 01 c. Prepare a consolidated balance sheet, income statement, and retained earnings statement for 20X6. (Be sure to list the assets and liabilities in order of their liquidity. Amount to be deducted should be indicated by a minus sign.) PRIME COMPANY AND SUBSIDIARY Consolidated Balance Sheet December 31, 20X6 Assets $ $ 0 0 Total Assets Liabilities 5 $ 0 Total Liabilities Stockholders' Equity Controlling Interest: $ 0 Total Controlling Interest Total Noncontrolling Interest Total Stockholders' Equity Total Liabilities and Stockholders' Equity 0 $ 0 PRIME COMPANY AND SUBSIDIARY Consolidated Income Statement Year Ended December 31, 20X6 01 Total expenses Consolidated net income 0 Income to Controlling $ 0 PRIME COMPANY AND SUBSIDIARY Consolidated Retained Earnings Statement Year Ended December 31, 20X6 Retained Earnings, January 1, 20X6 Income to Controlling Interest, 20X6 $ 0 Dividends Declared, 20X6 Retained Earnings, December $ 31, 20X6 0 Dividends Declared Prime Company holds 80 percent of Suspect Company's stock, acquired on January 1, 20X2, for $174,000. On the acquisition date, the fair value of the noncontrolling interest was $43,500. Suspect reported retained earnings of $50,000 and had $100,000 of common stock outstanding. Prime uses the fully adjusted equity method in accounting for its investment in Suspect. Trial balance data for the two companies on December 31, 20X6, are as follows: Prime Company Suspect Company Item Debit Credit Debit Credit Cash & Accounts Receivable $ 129,000 $ 39,000 Inventory 273,000 86,000 Land 100,000 70,000 Buildings & Equipment 490,000 180,000 Investment in Suspect Co. 207,590 Cost of Goods Sold 145,000 82,800 Depreciation and Amortization Expense 24,500 18,000 13,000 8,000 30,000 5,000 Accumulated Depreciation $ 200,900 $ 54,000 Accounts Payable 52,000 22,000 Bonds Payable 170,000 60,000 Common Stock 300,000 100,000 Retained Earnings 396,340 72,800 Sales 250,000 180,000 Gain on Sale of Equipment 15,500 Income from Suspect Co. 27,350 Total $1,412,090 $1,412,090 $ 488,800 $ 488,800 Other Expenses Additional Information 1. At the date of combination, the book values and fair values of all separately identifiable assets and liabilities of Suspect were the same. At December 31, 20X6, the management of Prime reviewed the amount attributed to goodwill as a result of its purchase of Suspect stock and concluded an impairment loss of $19,575 should be recognized in 20X6 and shared proportionately between the controlling and noncontrolling shareholders. 2. On January 1, 20X5, Suspect sold land that had cost $8,000 to Prime for $18,000. 3. On January 1, 20X6, Prime sold to Suspect equipment that it had purchased for $75,000 on January 1, 20X1. The equipment has a total economic life of 15 years and was sold to Suspect for $65,500. Both companies use straight-line depreciation. 4. There was $6,500 of intercompany receivables and payables on December 31, 20X6. Required: a. Give all consolidation entries needed to prepare a consolidation worksheet for 20x6. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) view transaction list Consolidation Worksheet Entries Record the basic consolidation entry. Note: Enter debits before credits. Entry Accounts Debit Credit 1 Record entry Clear entry view consolidation entries b. Prepare a three-part worksheet for 20X6. (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.) Consolida ol 0 0 0 PRIME COMPANY AND SUBSIDIARY Consolidated Financial Statement Worksheet December 31, 20X6 Consolidation Entries Prime Suspect DR CR Co. Co. Income Statement Sales Gain on Sale of Equipment Less: COGS Less: Depr. & Amort. Expense Less: Other Expenses Less: Goodwill Impairment Loss Income from Suspect Co. Consolidated Net Income 0 0 0 NCI in Net Income Controlling Interest in NI 0 0 0 Statement of Retained Earnings Beginning Balance Net Income Less: Dividends Declared Ending Balance 0 0 0 Balance Sheet Cash and Accounts Receivable Inventory Land Buildings & Equipment Less: Accumulated Depreciation Investment in Suspect Co. Goodwill Total Assets 0 0 0 Accounts Payable Bonds Payable Common Stock Retained Earnings NCI in NA of Suspect Co. Total Liabilities & Equity 01 0 0 0 0 0 0 01 01 c. Prepare a consolidated balance sheet, income statement, and retained earnings statement for 20X6. (Be sure to list the assets and liabilities in order of their liquidity. Amount to be deducted should be indicated by a minus sign.) PRIME COMPANY AND SUBSIDIARY Consolidated Balance Sheet December 31, 20X6 Assets $ $ 0 0 Total Assets Liabilities 5 $ 0 Total Liabilities Stockholders' Equity Controlling Interest: $ 0 Total Controlling Interest Total Noncontrolling Interest Total Stockholders' Equity Total Liabilities and Stockholders' Equity 0 $ 0 PRIME COMPANY AND SUBSIDIARY Consolidated Income Statement Year Ended December 31, 20X6 01 Total expenses Consolidated net income 0 Income to Controlling $ 0 PRIME COMPANY AND SUBSIDIARY Consolidated Retained Earnings Statement Year Ended December 31, 20X6 Retained Earnings, January 1, 20X6 Income to Controlling Interest, 20X6 $ 0 Dividends Declared, 20X6 Retained Earnings, December $ 31, 20X6 0