On January 1, 2015, the Herco Company purchased 70% of the outstanding voting share of the Wing Company for $ 850,000 in cash. On that date, the Wing Company had retained earnings of $ 400,000 and common shares of $ 500,000. On the acquisition date, the identifiable assets and liabilities of the Wing Company had fair values that were equal to their carrying values except for the building, which had a fair value 200,000 greater that its carrying value, and long term liabilities which had fair values that were $ 100,000 great than their carrying values. The building had a remaining useful life of ten years on January 1, 2015 and the long term liabilities mature on December 31, 2021. Both companies use the straight line method to calculate all depreciation and amortization. The trial balances of the Herco Company and Wing Company on December 31, 2019 are contained on the attached excel sheet.

Included in Wings Dec. 31, 2019 inventory were goods purchased from Herco in 2019 for $ 30,000. Herco charges all customers 20% over cost. Included in Hercos Dec. 31, 2019 inventory were goods purchased from Wing in 2019 for $40,000. Wing charges all customers a markup on cost of 25%.

On Dec. 31, 2019 Herco purchased a bond investment at a cost of $ 250,000 in the open market which represented 50% of the bond payable that had been issued at par value by Wing in January 2019.

Goodwill was impaired by $ 50,000 at December 31, 2019.

No changes in common shares have occurred in Wing since the date of acquisition.

Required:

For the Herco Company and its subsidiary, the Wing Company, prepare in worksheet format (using the attached excel worksheet):

1 (a).The consolidated income statement for the year ended December 31, 2019.

1 (b).The consolidated statement of financial position at December 31, 2019.

2.Prepare all required consolidation journal entries on a second excel page attached to your consolidation worksheet.

				Trial Balance					Consolidation Adjustments					Consolidated Income Statement				Consolidated Statement of Financial Position
				December 31, 2019.										For the Year Ended Dec. 31, 2019.				December 31, 2019.
				Herco	Herco	Wing	Wing
				Debit	Credit	Debit	Credit		Debit	Debit	Credit	Credit			Debit	Credit			Debit	Credit
Assets
Cash				50,000		10,000
Accounts receivable				220,000		100,000
Account receivable, Wing				80,000		0
Inventories				2,700,000		520,000
Equipment (net)				6,150,000		2,500,000
Buildings (net)				2,600,000		500,000
Investment in Bond				250,000
Investment in Wing		(cost)		850,000
Liabilities and Equity
Accounts payable					280,000		170,000
Account payable, Wing					20,000		0
Long term liabilities					4,000,000		600,000
Bond payable							500,000
Common shares					3,000,000		500,000
Retained earnings, beginning of year					4,500,000		1,600,000
Dividends declared and paid in year				200,000		20,000
Revene and Expenses
Sales revenue					3,500,000		900,000
Other revenue					300,000		30,000
Cost of goods sold				2,000,000		400,000
Depreciation expense				300,000		100,000
Other expenses				200,000		150,000
				15,600,000	15,600,000	4,300,000	4,300,000