On January 1, 20X1, Parent Company purchased 80% of the common stock of Subsidiary Company for $316,000. On this date, Subsidiary had common stock, other paid-in capital, and retained earnings of $40,000, $120,000, and $190,000, respectively. Net income and dividends for 2 years for Subsidiary Company were as follows:

20X1 20X2

Net income $50,000 $90,000

Dividends 10,000 20,000

On January 1, 20X1, the only tangible assets of Subsidiary that were undervalued were inventory and building. Inventory, for which FIFO is used, was worth $5,000 more than cost. The inventory was sold in 20X1. Building, which was worth $15,000 more than book value, has a remaining life of 8 years, and straight-line depreciation is used. Any remaining excess is goodwill.

Complete the consolidating worksheet for December 31, 20X2.

Parent Co Subsidiary Co

Inventory 60,000 40,000

Other Current Assets 118,000 180,00

Investment in Subsidiary 404,000

Land 60,000 80,000

Building and Equipment 350,000 300,000

Accumulated Depreciation <120,000> <50,000>

Current Liability <150,000> <40,000>

Bonds Payable <50,000>

Other Long Term Liability <100,000>

Common Stock-P Co <100,000>

Other Paid in Capital-P Co <200,000>

Retained Earnings-P Co <200,000>

Common Stock-S Co <40,000>

Other Paid in Capital-S Co <120,000>

Retained Earnings-S Co <230,000>

Net Sales <550,000> <400,000>

Cost of Goods Sold 320,000 210,000

Operating Expense 130,000 100,000

Subsidiary Income <72,000>

Dividends Declared-P Co 50,000

Dividends Declared-S Co 20,000

I