It is based on Chapter 5, so NCI is involved and a Differential is involved. Key pages are 193 through 197. Part 3 must use same general format style as Figure 5-4 in text. Remember additional formatting requirements in syllabus.

On January 1, 2021, Penguin Corp. bought 80% of the stock of Sea Gull Corp. for $700,000. The Balance Sheets of the two companies immediately after acquisition (January 1, 2021) of Sea Gull Corp. showed the following:

PenguinSea Gull

Cash$130,000$ 100,000

Accounts Receivable 120,00030,000

Inventory400,000 10,000

Land500,000100,000

Buildings & Equipment - Net 1,000,000420,000

Trademarks040,000

Investment in Sea Gull700,0000

Total Assets2,850,000700,000

Accounts Payable$420,000 80,000

Long-Term Liabilities 1,080,000 20,000

Common Stock 1,000,000 400,000

Additional Paid in Capital0 50,000

Retained Earnings350,000 150,000

Total Liabilities and Stockholders' Equity$2,850,000700,000

On the date of acquisition, the Book Value of Sea Gull equaled its Fair Market Value (FMV), except for land that had a FMV of $140,000 and the trademarks that had a FMV of $60,000. On the date of acquisition the FMV of previously unrecorded identifiable intangibles (2-year life) of Sea Gull was $40,000, and the NonControlling Interest (NCI)'s fair value is $175,000. Penguin uses the equity method to record its investment in Sea Gull. Penguin found that a $10,000 impairment of goodwill took place during 2021. At the end of 2021, Penguin owed Sea Gull $25,000, and Sea Gull owed Penguin $45,000. Here the trial balance data for Penguin and Sea Gull on December 31, 2021:

__PenguinSea Gull__

Debits:

Cash$290,000$ 100,000

Accounts Receivable 210,000190,000

Inventory 400,00050,000

Land300,000100,000

Buildings & Equipment-Net 1,100,000 330,000

Trademarks040,000

Investment in Sea Gull756,0000

Cost of Goods Sold 550,000220,000

Depreciation Expense 130,000 45,000

Other Expenses20,00035,000

Dividends Declared 100,00050,000

$3,856,000$1,160,000

Credits:

Accounts Payable$300,000$ 90,000

Long-Term Liabilities 1,200,000 20,000

Common Stock 1,000,000400,000

Additional Paid in Capital-50,000

Retained Earnings, Jan. 1350,000150,000

Sales 910,000450,000

Income from Subsidiary 96,0000

$3,856,000$1,160,000

Required:

A. Prepare the journal entries Penguin made during 2021 related to its investment in Sea Gull.

B. Prepare the consolidation/eliminating entries needed to consolidate the two companies at the end of 2021.

C. Prepare the consolidation working paper. Put required CEs/EEs in their proper columns. Use a coding system.