Land QUESTION Purple Company acquired 70 percent of Silk Company's outstanding common stock for $50.400 or January 1, 2020, equals to the book value of Silk's net assets. Adjusted trial balance data for Purple and Silk as of December 31, 2020, are as follows (all amounts are in dollars): Purple Company Sik Company DR DR Cash $32,000 $14,000 Accounts Receivable 14,000 7,000 Inventory 19,000 30,000 Investment in Silk 61,950 35,000 27.500 Buildings and equipment 90,000 63,000 Cost of Goods Sold 33,500 15,500 Depreciation Expense 9,500 4,000 Selling and Administrative Expense 28,000 6,000 Dividends Declared 7,000 3,000 Accumulated Depreciation $53,000 $15.300 Accounts Payable 27,300 6,700 Bonds Payable 35,000 31,000 Common Stock 62.500 44,000 Retained Earnings 36,000 28.000 Sales 102,500 45,000 Income from Silk 13,650 Total $329,950 $329,950 $170,000 $170,000 a) Prepare the journal entries related to the investment in Silk Company during 2020 (15 points). b) Prepare Book Value calculation table (10 points) c) Prepare basic consolidation entry (28 points). d) Prepare accumulated depreciation consolidation entry (10 points). c) Prepare a consolidation worksheet for 2020 in good form (30 points). 1) Prepare a consolidated balance sheet as of December 31 2020 (7 Points) SOLUTION Equity method journal entries related to the investme ACCOUNT TITLE Debit Credit Book Value Calculations NCI (30%) Parent's Investment (70%) Common Stock Retained Earnings Basic Consolidation entry ACCOUNT TITLE Debit Credit Accumulated Depreciation Consolidation Entry ACCOUNT TITLE Debit Credit Consolidation worksheet Elimination Entries Income Statement Purple Sk Consolidated DR CR Less: COGS Less: Depreciation Expense Less: Other Expenses Income from Silk Consolidated Net Income NCI in Net income of Sik Controlling interest in Net Income Statement of Retained Earnings Beginning Balance Net Income Less: Dividends Declared Ending Balance Balance Sheet Assets: Cash Accounts Receivable Inventory Investment in Silk Land Buildings & Equipment Less Accumulated Depreciation Total Assets Liabilities and Equity Accounts Payable Bonds Payable Common Stock Retained Earnings NC in Net assets of Silk Total Liabilities & Equity Purple Company and Subsidiary Consolidated Balance Sheet December 31, 2020