On January 1, 2021, Penguin Corporation bought 80% of the stock of Sea Gull Corporation for $700,000. The Balance Sheets of the two companies immediately after the acquisition (January 1, 2021) of Sea Gull Corp. showed the following amounts:

Penguin Sea Gull

Cash $130,000 $100,000

A/R. 120,000 30,000

Inventory 400,000 10,000

Land 500,000 100,000

Buildings & Equip.-Net 1,000,000 420,000

Trademarks 0 40,000

Investment in Sea Gull 700,000 0

Total Assets 2,850,000 700,000

A/P $420,000 80,000

L-T Liabilities. 1,080,000 20,000

Common Stock 1,000,000 400,000

Additional Paid in Capital - 50,000

Retained Earnings 350,000 150,000

Total Liabilities and

Stockholders' Equity. $2,850,000 700,000.

On the date of acquisition, the Book Value of Sea Gull equaled its Fair Market Value (FMV), except for land that had a FMV of $140,000 and the trademarks that had a FMV of $60,000. On the date of acquisition the FMV of previously unrecorded identifiable intangibles (2-year life) of Sea Gull was $40,000, and the NonControlling Interests fair value is $175,000. Penguin uses the equity method to record its investment in Sea Gull.

Required:

1. List all journal entries that Penguin made to record its investment in Sea gull on the date of acquisition.

2. List all Elimination Entries that would need to be made in order to prepare a workpaper for the consolidated Balance Sheet of Penguin and Sea gull immediately after the combination (January 1, 2019).

3. Prepare a workpaper for the consolidated Balance Sheet of Penguin and Sea gull immediately after the combination (January 1, 2021). Show all necessary elimination entries in their proper columns. Use a letter coding system for each elimination entry. Use Figure 5-2 in text for general format, and syllabus for additional formal requirements. Remember to do the format requirements in the syllabus, such as Dates, Company name (i.e. parent identified), Name of statement, Dollar Signs, Commas, and Underlines.