P Corporation acquired 80% of S Corporation on January 1, 2011 for $240,000 cash when S?s stockholders? equity consisted of $100,000 of Common Stock and $30,000 of Retained Earnings. The difference between the price paid by P and the underlying equity acquired in S was allocated solely to a patent amortized over 10 years. P sold merchandise to S during the year in the amount of $30,000. $10,000 worth of inventory is still on hand at the end of the year with an unrealized profit of $4,000. The separate company statements for P and S appear in the first two columns of the partially completed consolidated workpaper. Required: Complete the consolidated workpaper for P and S for the year 2011 and prepare the required elimination entries in journal form

Advanced Accounting-Fall 2011-Exam 2 1. Pair Company acquired 80% of the outstanding common stock of Sax Company on January 2, 2010 for $675,000. At that time, Sax's total stockholders' equity amounted to $1,000,000. Sax Company reported net income and dividends for the last two years as follows: 2010 Reported net income $45,000 Dividends distributed 35,000 2011 $60,000 75,000 Required: Prepare journal entries for Pair Company for 2010 and 2011 assuming Pair uses: A. The cost method to record its investment B. The complete equity method to record its investment. The difference between implied value and the book value of equity acquired was attributed solely to a building, with a 20-year expected life. 2. Pruitt Corporation acquired all of the voting stock of Soto Corporation on January 1, 2010, for $210,000 when Soto had common stock of $150,000 and retained earnings of $24,000. The excess of implied over book value was allocated $9,000 to inventories that were sold in 2010, $12,000 to equipment with a 4-year remaining useful life under the straight-line method, and the remainder to goodwill. Financial statements for Pruitt and Soto Corporations at the end of the fiscal year ended December 31, 2011 (two years after acquisition), appear in the first two columns of the partially completed consolidated statements workpaper. Pruitt Corp. has accounted for its investment in Soto using the partial equity method of accounting. Required: Complete the consolidated statements workpaper for Pruitt Corporation and Soto Corporation for December 31, 2011 and prepare the required elimination entries in journal form Pruitt Corporation and Soto Corporation Consolidated Statements Workpaper at December 31, 2011 Elimination s Pruitt Corp. INCOME STATEMENT Sales Equity from Subsidiary Income Cost of Sales Other Expenses Net Income to Ret. Earn. Pruitt Retained Earnings 1/1 Soto Retained Earnings 1/1 Add: Net Income Less: Dividends Retained Earnings 12/31 BALANCE SHEET Cash Inventories Land Equipment and Buildings-net Investment in Soto Corp. Total Assets LIA & EQUITIES Liabilities Common Stock Retained Earnings Total Equities Soto Corp. 618,000 180,000 36,000 (450,000) (90,000) (114,00 (54,000 0) ) 90,00 0 36,000 72,000 30,000 90,000 36,000 (12,000 (60,000) ) 102,00 54,00 0 0 42,000 63,000 33,000 21,000 45,000 18,000 192,000 165,000 240,000 570,000 249,000 168,000 300,000 102,000 570,000 45,000 150,000 54,000 249,000 Debit Credit Consolidated Balances 3. P Corporation acquired 80% of S Corporation on January 1, 2011 for $240,000 cash when S's stockholders' equity consisted of $100,000 of Common Stock and $30,000 of Retained Earnings. The difference between the price paid by P and the underlying equity acquired in S was allocated solely to a patent amortized over 10 years. P sold merchandise to S during the year in the amount of $30,000. $10,000 worth of inventory is still on hand at the end of the year with an unrealized profit of $4,000. The separate company statements for P and S appear in the first two columns of the partially completed consolidated workpaper. Required: Complete the consolidated workpaper for P and S for the year 2011, and prepare the required elimination entries in journal form. P Corporation and Subsidiary Consolidated Statements Workpaper at December 31, 2011 P S Elimination Noncontroll Consolidated s Corp. ing Cr. Corp. Dr. Interest Balances Income Statement Sales 150,00 200,000 Dividend Income 16,000 0 (92,000 (47,000) Cost of Sales ) Other Expenses (23,000) (40,000) Noncontrolling Interest in Income 101,00 Net Income 63,000 0 Retained Earnings Statement 110,00 Retained Earnings 1/1 30,000 0 101,00 Add: Net Income 63,000 0( 30,000 (20,000 Less: Dividends ) 181,00 ) 73,000 Retained Earnings 12/31 0 Balance Sheet 20,00 Cash 19,000 0 120,00 Accounts Receivable-net 55,000 0 140,00 Inventories 80,000 0 Patent Land 270,000 420,000 Equipment and Buildings-net 600,000 430,000 Investment in S Corporation 240,000 1,390,00 1,004,00 Total Assets 0 0 Equities Accounts Payable 909,000 831,000 Common Stock 300,000 100,000 181,00 Retained Earnings 73,000 0 1/1 Noncontrolling Interest in Net Assets 12/31 Noncontrolling Interest in Total Equities Net Assets 1,390,00 1,004,00 0 0