Egret Corporation paid $24,800 for an 80% interest in Plume Corporation on January 1, 2004, at which time Plume?s stockholders? equity consisted of $15,000 of Common Stock and $6,000 of Retained Earnings. The fair values of Plume Corporation?s assets and liabilities were identical to recorded book values when Egret acquired its 80% interest. Plume Corporation reported net income of $4,000 and paid dividends of $2,000 during 2004. Egret Corporation sold inventory items to Plume during 2004 and 2005 as follows: 2004 2005 Egret?s sales to Plume $ 5,000 $ 6,000 Egret?s cost of sales to Plume 3,000 3,500 Unrealized profit at year-end 1,000 1,500 The accounts payable of Plume include $1,500 owed to Egret for inventory purchases. Required: Financial statements of Egret and Plume appear in the first two columns of the partially completed working papers. Complete the consolidation working papers for Egret Corporation and Subsidiary for the year ended December 31, 2005.

Problem # 1 (in thousands) INCOME STATEMENT Sales Income from Plume Cost of sales Operating expense Noncontrolling int. share Net income RETAINED EARNINGS Retained earnings - Egret Retained earnings - Plume Net income Dividends Retained earnings - end BALANCE SHEET Cash Accounts Receivable - net Dividends Receivable Inventories Equipment and Buildings - net Investment in Plume stock Goodwill Total assets Accounts payable Dividends Payable Other debt Common stock Retained earnings Total equities Noncontrolling interest | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Egret CORPORATION AND SUBSIDIARY CONSOLIDATION WORKSHEET FOR THE YEAR ENDED DECEMBER 31, 2005 | 80% | Adjustments & Eliminations | Egret | Plume | Debits Credits | Consolidated | | 43,000 | 20,000 | 6,700 | | (22,000) | (8,000) | | | (12,200) | (3,000) | | | 15,500 | 9,000 | | | 10,000 | | | 8,000 | 15,500 | 9,000 | (10,000) | (5,000) | | | 15,500 | 12,000 | | | 5,400 | 3,000 | 15000 | 10,000 | 2,000 | | 18,000 | 8,000 | 24,000 | 31,000 | 28,100 | | | | | | 92,500 | 52,000 | 17,500 | 12,500 | 7,000 | 2,500 | 12,500 | 10,000 | 40,000 | 15,000 | 15,500 | 12,000 | 92,500 | 52,000 | | |