Monte Company acquired 70% of the stock of Mo Company on 1 January 2018, for $150,000. On this date, the balances of Mos stockholders equity accounts were: Common Stock, $130,000, and Retained Earnings, $14,000. On 1 January 2018, the market value for the 30% of shares not purchased by Monte was $63,800.

On 1 January 2018, Mos recorded book values were equal to fair values for all items except: (1) accounts receivable had a book value of $40,000 and a fair value of $36,000, (2) buildings and equipment, net, had a book value of $35,000 and a fair value of $53,000, (3) the licenses intangible asset had a book value of $10,000 and a fair value of $52,000, and (4) notes payable had a book value of

$24,000 and a fair value of $18,000. Both companies use the FIFO inventory method and sell all of their inventories at least once per year. The net balance of trade receivables are collected in the following year. On the acquisition date, the subsidiarys buildings and equipment, net, had a remaining useful life of 6 years, licenses had a remaining useful life of 7 years, and notes payable had a remaining term of 4 years.

On 1 January 2021, Monte sold a building to Mo for $65,000. On this date, the building was carried on Montes books (net of accumulated depreciation) at $50,000. Both companies estimated that the building has a remaining life of 6 years on the intercompany sale date, with no salvage value.

Each company routinely sells merchandise to the other company, with a gross profit margin of 25 percent (regardless of the direction of the sale). During 2022, intercompany sales amount to

$15,000, of which $8,000 of merchandise remains in the ending inventory of the parent. On 31 December 2022, $4,000 of these intercompany sales remained unpaid. Additionally, the subsidiarys 31 December 2021 inventory includes $12,000 of merchandise purchased in 2021 from the parent. During 2021, intercompany sales amount to $20,000, and on 31 December 2021, $7,000 of these intercompany sales remained unpaid.

Monte uses the equity method to account for its investment in Mo. The pre-closing trial balances for the two companies for the year ended 31 December 2022, are provided on the following page.

Required: Prepare a consolidation worksheet and the appropriate eliminating entries to determine consolidated balances for external financial reporting as of 31 December 2022. You will earn credit for this problem by (1) journalizing the correct consolidating entries, and (2) computing the correct consolidated balances for each line item on the financial statements (including the income to the noncontrolling interest).

QUESTION 1 (CONTINUED)

	Monte	Mo
Debits
Cash	$ 38,720	$ 15,000
Accounts receivable	54,000	48,000
Inventories	130,000	46,000
Buildings and equipment, net	126,000	90,000
Other assets	57,000	100,000
Licenses	-	10,000
Investment in Mo	179,900	-
Cost of goods sold	240,000	108,000
Depreciation & amortization expense	12,000	9,600
Operating expenses	156,000	38,400
Dividends declared	60,000	14,000
Total debits	$ 1,053,620	$ 479,000
Credits
Accounts payable	$ 32,220	$ 12,000
Notes payable	50,000	21,000
Other liabilities	22,000	26,000
Common stock	240,000	130,000
Retained earnings (Jan. 1, 2022)	214,800	110,000
Sales	480,000	180,000
Equity in subsidiary income	14,600	-
Total credits	$ 1,053,620	$ 479,000