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P Corporation acquired 70 percent ownership of S Company on January 1, 20X6, at underlying book value. At that date, the fair value of the

P Corporation acquired 70 percent ownership of S Company on January 1, 20X6, at underlying book value. At that date, the fair value of the noncontrolling interest was equal to 30 percent of the book value of S. On January 1, 20X8, Portfolio sold 1,000 shares of S Company for $20,000 to A Corporation and recorded a $5,000 gain. Trial balances for the companies on December 31, 20X8, contain the following data:

P Corp.

S Company

Debit

Credit

Debit

Credit

Cash

$

70,000

$

20,000

Accounts Receivable

60,000

40,000

Inventory

80,000

60,000

Buildings and Equipment

400,000

200,000

Investment in S

114,000

Cost of Goods Sold

180,000

90,000

Depreciation Expense

40,000

20,000

Other Expenses

17,000

30,000

Dividends Declared

25,000

20,000

Accumulated Depreciation

$

80,000

$

60,000

Accounts Payable

40,000

30,000

Bonds Payable

100,000

40,000

Common Stock ($5 par)

150,000

50,000

Additional Paid-In Capital

75,000

10,000

Retained Earnings

200,000

90,000

Sales

300,000

200,000

Gain on Sale of S Company Stock

5,000

Income from S Company

36,000

$

986,000

$

986,000

$

480,000

$

480,000

S Company's net income was earned evenly throughout the year. Both companies declared and paid their dividends on December 31, 20X8. P uses the fully adjusted equity method in accounting for its investment in S.

Required:

1. Prepare the elimination entries needed to complete a full consolidation worksheet for 20X8.

2. Prepare a consolidation worksheet for 20X8.

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