Question
On January 1, 2013, Perry Company purchased 80% of Selby Company for $961,500. At that time Selby had capital stock outstanding of $403,400 and retained
On January 1, 2013, Perry Company purchased 80% of Selby Company for $961,500. At that time Selby had capital stock outstanding of $403,400 and retained earnings of $396,100.
The fair value of Selby Company's assets and liabilities is equal to their book value except for the following:
Fair ValueBook ValueInventory$229,700$154,800Plant and Equipment (10-year life)804,700603,800
One-half of the inventory was sold in 2013; the remainder was sold in 2014.
At the end of 2013, Perry Company had in its ending inventory $53,700 of merchandise it had purchased from Selby Company during the year. Selby Company sold the merchandise at 20% above cost. During 2014, Perry Company sold merchandise to Selby Company for $298,800 at a markup of 20% of the selling price. At December 31, 2014, Selby still had merchandise that it purchased from Perry Company for $77,400 in its inventory.
Financial data for 2014 are presented here:
Perry
Corporation
Selby
Company
Sales$1,388,200$723,000Equity in Subsidiary Income156,288Total Revenue1,544,488723,000Cost of Goods Sold:Beginning Inventory208,700155,900Purchases875,400359,100Cost of Goods Available1,084,100515,000Less: Ending Inventory403,700225,800Cost of Goods Sold680,400289,200Other Expenses226,200170,200Total Cost and Expense906,600459,400Net Income$637,888$263,600
1/1 Retained Earnings$1,412,200$449,400Net Income637,888263,600Dividends Declared(39,900)(30,200)12/31 Retained Earnings$2,010,188$682,800Cash$90,300$64,800Accounts Receivable297,40085,000Inventory403,700225,800Investment in Selby Company1,082,836Plant and Equipment (net)875,800545,100Other Assets (net)387,300230,200Total Assets$3,137,336$1,150,900Accounts Payable$22,848$24,600Other Current Liabilities95,20040,100Common Stock1,009,100403,400Retained Earnings2,010,188682,800Total Liabilities and Equity$3,137,336$1,150,900
(a)
Prepare the consolidated statements workpaper for the year ended December 31, 2014.(List items that increase retained earnings first.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started