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Pillow Corporation acquired 80 percent ownership of Sheet Company on January 1, 20X7, for $173,000. At that date, the fair value of the noncontrolling interest was $43,250. The trial balances for the two companies on December 31, 20X7, included the following amounts: Credit Sheet Company Debit Credit $ 25,000 55,000 100,000 20,000 150,000 Item Cash Accounts Receivable Inventory Land Buildings & Equipment Investment in Sheet Company Cost of Goods Sold Depreciation Expense Other Expenses Dividends Declared Accumulated Depreciation Accounts Payable Mortgages Payable Common Stock Retained Earnings Sales Income from Sheet Company Pillow Corporation Debit $ $ 38,000 50,000 240,000 80,000 500,000 202,000 500,000 25,000 75,000 50,000 $ 155,000 70,000 200,000 300,000 290,000 700,000 45,000 $1,760,000 $1,760,000 250,000 15,000 75,000 20,000 $ 75,000 35,000 50,000 50,000 100,000 400,000 $710,000 $710,000 Additional Information 1. On January 1, 20X7, Sheet reported net assets with a book value of $150,000 and a fair value of $191,250. Accumulated depreciation on Buildings and Equipment was $60,000 on the acquisition date. 2. Sheet's depreciable assets had an estimated economic life of 11 years on the date of combination. Goodwill of $25,000 was recorded at the acquisition. 3. Pillow used the equity method in accounting for its investment in Sheet. 4. Detailed analysis of receivables and payables showed that Sheet owed Pillow $16,000 on December 31, 20x7. Required: a. Prepare all journal entries recorded by Pillow with regard to its investment in Sheet during 20X7. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) b. Prepare all consolidation entries needed to prepare a full set of consolidated financial statements for 20x7. (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. Event Accounts Debit Credit 1 Record entry Clear entry view consolidation entries c. Prepare a three-part consolidation worksheet as of December 31, 20X7. (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.) PILLOW CORPORATION AND SUBSIDIARY Worksheet for Consolidated Financial Statements December 31, 20X7 Consolidation Entries Pillow Corp. Sheet Co. DR CR Consolidated Income Statement Sales Less: COGS Less: Depreciation expense Less: Other expenses Income from Sheet Company Consolidated net income $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 NCI in net income Controlling Interest in Net Income Statement of Retained Earnings Beginning balance Net income Less: Dividends declared Ending Balance $ 0 $ 0 $ 0 $ 0 $ 0 Balance Sheet Cash Accounts receivable Inventory Land Required: a. Prepare all journal entries recorded by Pillow with regard to its investment in Sheet during 20x7. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet Record the initial investment in Sheet Company Note: Enter debits before credits. Event General Journal Debit Credit 1 Record entry Clear entry View general journal