E4-20 Basic Consolidation Worksheet LO 4-5

Police Corporation acquired 100 percent of Station Corporation's voting shares on January 1, 20X3, at underlying book value. At that date, the book values and fair values of Station's assets and liabilities were equal. Police uses the equity method in accounting for its investment in Station. Adjusted trial balances for Police and Station on December 31, 20X3, are as follows:

E4-20 Basic Consolidation Worksheet LO 4-5 Police Corporation acquired 100 percent of Station Corporation's voting shares on January 1, 20X3, at underlying book value. At that date, the book values and fair values of Station's assets and liabilities were equal. Police uses the equity method in accounting for its investment in Station. Adjusted trial balances for Police and Station on December 31, 20X3, are as follows: Station Corporation Debit Credit $ 105,000 225,000 Item Current Assets Depreciable Assets (net) Investment in Station Corporation Depreciation Expense Other Expenses Dividends Declared Current Liabilities Long-Term Debt Common Stock Retained Earnings Sales Income from Station Corporation Police Corporation Debit Credit $ 145,000 325,000 170,000 25,000 105,000 40,000 $ 50,000 100,000 200,000 230,000 200,000 30,000 $ 810,000 $ 810,000 15,000 75,000 10,000 $ 40,000 120,000 100,000 50,000 120,000 $ 430,000 $ 430,000 Required: a. Prepare the basic consolidation entry required on December 31, 20X3, to prepare consolidated financial statements. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) & Answer is not complete. No Event Accounts Credit Debit 30,000 A Income from Station Corporation Dividends declared 10,000 20,000 X Investment in Station Corporation Common stock Retained earnings X| 100,000 x 50,000 Investment in Station Corporation 150,000 x b. Prepare a three-part consolidation worksheet as of December 31, 20X3. (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.) X Answer is not complete. POLICE CORPORATION AND SUBSIDIARY Consolidated Financial Statements Worksheet December 31, 20X3 Consolidation Entries Police Station DR CR Corp. Corp. Consolidated $ $ $ 30,000 290,000 40,000 200,000 25,000 105,000 100,000 430,000 Income Statement Sales Less: Depreciation expense Less: Other expenses Income from Station Corp. Net income Statement of Retained Earnings Beginning balance Net income Less: Dividends declared 120,000 15,000 X 75,000 X 30,000 X 240,000 180,000 130,000 $ $ $ 30,000 $ 0 $ 640,000 $ $ 50,000 30,000 230,000 100,000 (40,000) 290,000 50,000 30,000 (10,000) 70,000 10,000 10,000 230,000 100,000 (40,000) 290,000 $ $ $ 80,000 $ $ $ $ $ 250,000 105,000 225,000 Ending balance Balance Sheet Current assets Depreciable assets (net) Investment in Station Corp. Total Assets Current liabilities Long-term debt Common stock Retained earnings Total liabilities & equity 20,000 X 20,000 $ 0 $ $ $ $ 145,000 325,000 170,000 640,000 50,000 100,000 200,000 290,000 640,000 $ $ 330,000 40,000 120,000 100,000 70,000 330,000 550,000 150,000 950,000 90,000 220,000 200,000 290,000 800,000 100,000 80,000 180,000 10,000 10,000 $ $ $ $ $