On January 1, 2012, Wainwright Company purchased 80% of the outstanding common stock of Wacha Company for $5,000,000. Any excess of fair value over book value was attributable to equipment with a remaining useful life of 10 years that was understated by $300,000, a building with a remaining life of 20 years that was understated by $300,000, and goodwill. Immediately after acquiring a controlling stake in Wacha Company, Wainwright effectively retired Wachas outstanding bonds by purchasing them from outside parties.

The following partial trial balances for Wainwright Co. and Wacha Co. were prepared on December 31, 2012

Additional Information:

Wainwright uses the simple equity method to account for its investment in Wacha Company

Wacha has issued bonds twice since 2005. Information for those bond issuances is as follows:

On January 1, 2006, Wacha issued $20,000 of 10-year, 5% bonds. The bonds sold at 90. These bonds were purchased by Wainwright for $19,600. The bonds pay interest on 12/31 each year.

On January 1, 2010, Wacha issued $50,000 of 10-year, 6% bonds. The bonds sold at 102. These bonds were purchased by Wainwright for $51,600. The bonds pay interest on 12/31 each year.

Wainwright and Wacha do not supply each other with merchandise inventory.

Required:

In Excel, prepare the journal entries that would appear on the worksheet necessary to produce the consolidated financial statements of Wainwright and Wacha on December 31, 2012 (10 points).

In Excel, complete the worksheet necessary to produce the consolidated financial statements of Wainwright and Wacha on December 31, 2012 (20 points).

Wainwright Wacha 82,120 41.0000 Accounts Receivable 629,000 400,000 1,215,000 350,000 Inventory 1,650,000 790,100 1,380,000 3860.000 0826000) 342,000h Accumulated Depreciation Buildings 2,016000 Equipment 1,086,000 (200,000) Accumulated Depreciation Equipment 612,000h Investment in Wacha Co. 5,284,000 Investrneut in Wacha Co. bonds 71,100 0180,000) Accounts payable (80,000) C70,000) Bonds Payable Disconut on Bonds Payable Premium on Bonds Payable 400,000) Common Stock S1 Par) (1,800,0000 02,000,000) Paid-in Capital in Excess of Par (200,0000) 4,101,320) 12,400,000) Retained Earnings, January 1, 2012 38,000,000) C1,000,000) Sales Interest revenue Cost of Goods Sold 30,000,000 600,900 Interest expense other operating Expenses 3,000,000 40,0000 Subsidiary income Wainwright Wacha 82,120 41.0000 Accounts Receivable 629,000 400,000 1,215,000 350,000 Inventory 1,650,000 790,100 1,380,000 3860.000 0826000) 342,000h Accumulated Depreciation Buildings 2,016000 Equipment 1,086,000 (200,000) Accumulated Depreciation Equipment 612,000h Investment in Wacha Co. 5,284,000 Investrneut in Wacha Co. bonds 71,100 0180,000) Accounts payable (80,000) C70,000) Bonds Payable Disconut on Bonds Payable Premium on Bonds Payable 400,000) Common Stock S1 Par) (1,800,0000 02,000,000) Paid-in Capital in Excess of Par (200,0000) 4,101,320) 12,400,000) Retained Earnings, January 1, 2012 38,000,000) C1,000,000) Sales Interest revenue Cost of Goods Sold 30,000,000 600,900 Interest expense other operating Expenses 3,000,000 40,0000 Subsidiary income