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Lance Corporation purchased 75 percent of Avery Companys common stock at underlying book value on January 1, 20X3. At that date, the fair value of

Lance Corporation purchased 75 percent of Avery Companys common stock at underlying book value on January 1, 20X3. At that date, the fair value of the noncontrolling interest was equal to 25 percent of Avery's book value. Trial balances for Lance and Avery on December 31, 20X7, are as follows:

20X7 Trial Balance Data
Lance Corporation Avery Company
Item Debit Credit Debit Credit
Cash $ 44,900 $ 55,800
Accounts Receivable 127,000 122,000
Other Receivables 32,000 17,000
Inventory 168,000 127,000
Land 99,000 51,000
Buildings & Equipment 502,000 259,000
Investment in Avery Company:
Bonds 70,920
Stock 177,606
Cost of Goods Sold 616,000 225,000
Depreciation Expense 42,000 12,000
Interest & Other Expenses 32,000 19,000
Dividends Declared 47,000 21,000
Accumulated Depreciation $ 142,000 $ 68,000
Accounts Payable 157,097 118,480
Other Payables 35,000 15,000
Bonds Payable 230,000 180,000
Bond Premium 4,320
Common Stock 230,000 30,000
Additional Paid-In Capital 35,000
Retained Earnings 282,180 150,000
Sales 761,000 335,000
Interest & Other Income 19,000 8,000
Income from Avery Co. 67,149
Total $ 1,958,426 $ 1,958,426 $ 908,800 $ 908,800

During 20X7, Lance resold inventory purchased from Avery in 20X6. It had cost Avery $54,000 to produce the inventory, and Lance had purchased it for $69,000. In 20X7, Lance had purchased inventory for $50,000 and sold it to Avery for $70,000. At December 31, 20X7, Avery continued to hold $31,500 of the inventory.

Avery had issued $180,000 of 8 percent, 10-year bonds on January 1, 20X4, at 104. Lance had purchased $72,000 of the bonds from one of the original owners for $70,560 on December 31, 20X5. Both companies use straight-line write-off of premiums and discounts. Interest is paid annually on December 31. Assume Lance uses the fully adjusted equity method.

Required:
a.

What amount of cost of goods sold will be reported in the 20X7 consolidated income statement?

b.

What inventory balance will be reported in the December 31, 20X7, consolidated balance sheet?

c.

Prepare the journal entry to record interest expense for Avery for 20X7. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

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