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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: Suspect Company Debit Credit $ 36,000 96,000 65,000 140,000 Item Cash & Accounts Receivable Inventory Land Buildings & Equipment Investment in Suspect co. Cost of Goods Sold Depreciation and Amortization Expense Other Expenses Dividends Declared Accumulated Depreciation Accounts Payable Bonds Payable Common Stock Retained Earnings Sales Gain on Sale of Equipment Income from Suspect Co. Total Prime Company Debit Credit $ 126,000 254,000 80,000 500,000 202,290 150,800 25,000 15,000 30,000 $ 205,000 60,000 200,000 300,000 315, 660 260,000 14,500 27.930 $1,383,090 $1,383,090 78,200 14,000 7,000 5,000 $ 42,000 20,000 45,000 100,000 64,200 170,000 $441,200 $441,200 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 $7,000 to Prime for $15,750. 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 $64,500. Both companies use straight-line depreciation. 4. There was $5,000 of intercompany receivables and payables on December 31, 20X6. Required: a. Give all consolidation entries needed to prepare a consolidation worksheet for 20x6. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) No Accounts Debit Credit Entry 1 Common stock Retained earnings Income from Suspect Co. NCI in NI of Suspect Co. Dividends declared Investment in Suspect Co. NCI in NA of Suspect Co. 100,000 64,200 26,950 10,000 5,000 154,310 41,840 B 2 19,575 Goodwill impairment loss Income from Suspect Co. NCI in Nl of Suspect Co. 15,660 3,915 3 30,425 Goodwill Investment in Suspect Co. NCI IN NA of Suspect Co. >$ 24,340 6,085 D 4 5,000 Accounts payable Cash and accounts receivable 5,000 E 5 Investment in Suspect Co. NCI IN NA of Suspect Co. Land 7,000 1,750 8.750 F 6 Gain on sale Equipment Accumulated depreciation 14,500 10,500 25,000 G 7 2,000 Accumulated depreciation Depreciation expense 2,000 PRIME COMPANY AND SUBSIDIARY Consolidated Financial Statement Worksheet December 31, 20X6 Consolidation Entries Prime Suspect DR CR Co. Co. Consolidated 170,000 430,000 0 14,500 260,000 14,500 (150,800) (25,000) (15,000) 2,000 (78,200) (14,000) (7.000) (227,000) (39,000) (22,000) (19,575) 16,640 139,065 (6,085) 132.980 27.930 111,630 19,575 26,950 61,025 10,000 71,025 70,800 15,660 17,660 3,915 21,575 111,630 70,800 64,200 71,025 21,575 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 NCI in Net Income Controlling Interest in NI Statement of Retained Earnings Beginning Balance Net Income Less: Dividends Declared Ending Balance Balance Sheet Cash and Accounts Receivable Inventory Land Buildings & Equipment Less: Accumulated Depreciation Investment in Suspect Co. Goodwill Total Assets Accounts Payable Bonds Payable Common Stock Retained Earnings NCI in NA of Suspect Co. Total Liabilities & Equity 315,660 111,630 (30,000) 397290 64,200 70,800 (5,000) 130,000 315,660 132.980 (30,000) 418.640 135,225 5,000 26,575 5,000 126,000 254,000 80,000 500,000 (205,000) 202,290 36.000 96,000 65,000 140,000 (42,000) 8,750 157,000 350,000 136,250 650,500 (270,000) 30,640 10,500 2,000 X 7,000 30,425 X 49,925 25,000 178,650 217,400 5,000 957,290 60,000 200,000 300,000 397,290 295,000 20,000 45,000 100,000 130,000 30,425 1,084,815 75,000 245.000 300,000 418,640 45,925 1,084,565 100,000 135,225 2,000 242,225 26,575 47,925 74,500 957,290 295,000 c. Prepare a consolidated balance sheet, income statement, and retained earnings statement for 20X6. (Be sure to list the asset 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 Cash and accounts receivable $ 157,000 Inventory 350,000 Land 136,250 Retained earnings 30,640 Goodwill 30,425 Buildings and equipment 650,500 Accumulated depreciation (270,000) $ 380,500 Total Assets $ 1,084,815 Liabilities Accounts payable 75,000 Bonds payable 245,000 > $ 320,000 Total Liabilities Stockholders' Equity Controlling Interest Common stock Retained earnings 300,000 418,640 Total Controlling Interest 718.640 Total Noncontrolling Interest 45,925 Total Stockholders' Equity 764,565 Total Liabilities and Stockholders' Equity $ 1,084,565 "Red text indicates no response was expected in a cell or a formula-based calculation is incorrect; no points deducted. 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: Suspect Company Debit Credit $ 36,000 96,000 65,000 140,000 Item Cash & Accounts Receivable Inventory Land Buildings & Equipment Investment in Suspect co. Cost of Goods Sold Depreciation and Amortization Expense Other Expenses Dividends Declared Accumulated Depreciation Accounts Payable Bonds Payable Common Stock Retained Earnings Sales Gain on Sale of Equipment Income from Suspect Co. Total Prime Company Debit Credit $ 126,000 254,000 80,000 500,000 202,290 150,800 25,000 15,000 30,000 $ 205,000 60,000 200,000 300,000 315, 660 260,000 14,500 27.930 $1,383,090 $1,383,090 78,200 14,000 7,000 5,000 $ 42,000 20,000 45,000 100,000 64,200 170,000 $441,200 $441,200 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 $7,000 to Prime for $15,750. 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 $64,500. Both companies use straight-line depreciation. 4. There was $5,000 of intercompany receivables and payables on December 31, 20X6. Required: a. Give all consolidation entries needed to prepare a consolidation worksheet for 20x6. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) No Accounts Debit Credit Entry 1 Common stock Retained earnings Income from Suspect Co. NCI in NI of Suspect Co. Dividends declared Investment in Suspect Co. NCI in NA of Suspect Co. 100,000 64,200 26,950 10,000 5,000 154,310 41,840 B 2 19,575 Goodwill impairment loss Income from Suspect Co. NCI in Nl of Suspect Co. 15,660 3,915 3 30,425 Goodwill Investment in Suspect Co. NCI IN NA of Suspect Co. >$ 24,340 6,085 D 4 5,000 Accounts payable Cash and accounts receivable 5,000 E 5 Investment in Suspect Co. NCI IN NA of Suspect Co. Land 7,000 1,750 8.750 F 6 Gain on sale Equipment Accumulated depreciation 14,500 10,500 25,000 G 7 2,000 Accumulated depreciation Depreciation expense 2,000 PRIME COMPANY AND SUBSIDIARY Consolidated Financial Statement Worksheet December 31, 20X6 Consolidation Entries Prime Suspect DR CR Co. Co. Consolidated 170,000 430,000 0 14,500 260,000 14,500 (150,800) (25,000) (15,000) 2,000 (78,200) (14,000) (7.000) (227,000) (39,000) (22,000) (19,575) 16,640 139,065 (6,085) 132.980 27.930 111,630 19,575 26,950 61,025 10,000 71,025 70,800 15,660 17,660 3,915 21,575 111,630 70,800 64,200 71,025 21,575 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 NCI in Net Income Controlling Interest in NI Statement of Retained Earnings Beginning Balance Net Income Less: Dividends Declared Ending Balance Balance Sheet Cash and Accounts Receivable Inventory Land Buildings & Equipment Less: Accumulated Depreciation Investment in Suspect Co. Goodwill Total Assets Accounts Payable Bonds Payable Common Stock Retained Earnings NCI in NA of Suspect Co. Total Liabilities & Equity 315,660 111,630 (30,000) 397290 64,200 70,800 (5,000) 130,000 315,660 132.980 (30,000) 418.640 135,225 5,000 26,575 5,000 126,000 254,000 80,000 500,000 (205,000) 202,290 36.000 96,000 65,000 140,000 (42,000) 8,750 157,000 350,000 136,250 650,500 (270,000) 30,640 10,500 2,000 X 7,000 30,425 X 49,925 25,000 178,650 217,400 5,000 957,290 60,000 200,000 300,000 397,290 295,000 20,000 45,000 100,000 130,000 30,425 1,084,815 75,000 245.000 300,000 418,640 45,925 1,084,565 100,000 135,225 2,000 242,225 26,575 47,925 74,500 957,290 295,000 c. Prepare a consolidated balance sheet, income statement, and retained earnings statement for 20X6. (Be sure to list the asset 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 Cash and accounts receivable $ 157,000 Inventory 350,000 Land 136,250 Retained earnings 30,640 Goodwill 30,425 Buildings and equipment 650,500 Accumulated depreciation (270,000) $ 380,500 Total Assets $ 1,084,815 Liabilities Accounts payable 75,000 Bonds payable 245,000 > $ 320,000 Total Liabilities Stockholders' Equity Controlling Interest Common stock Retained earnings 300,000 418,640 Total Controlling Interest 718.640 Total Noncontrolling Interest 45,925 Total Stockholders' Equity 764,565 Total Liabilities and Stockholders' Equity $ 1,084,565 "Red text indicates no response was expected in a cell or a formula-based calculation is incorrect; no points deducted