P8-14A Consolidation Worksheet with Sale of Bonds to Subsidiary (Straight-Line Method) LO 8-2

Porter Company purchased 60 percent ownership of Service Corporation on January 1, 20X1, at underlying book value. At that date, the fair value of the noncontrolling interest was equal to 40 percent of Services book value. On January 1, 20X1, Porter sold $75,000 par value, 8 percent, five-year bonds directly to Service for $77,000 and the market interest rate was 7 percent. The bonds pay interest annually on December 31. Porter uses the fully adjusted equity method in accounting for its ownership of Service. On December 31, 20X2, the trial balances of the two companies are as follows: Note: Assume using straight-line amortization of bond discount or premium.

	Porter Company									Service Corporation
Item	Debit					Credit				Debit				Credit
Cash & Accounts Receivable		$	89,200							$	40,000
Inventory			137,000								65,000
Buildings & Equipment			505,000								300,000
Investment in Service Corporation Stock			103,800
Investment in Porter Company Bonds											76,200
Cost of Goods Sold			96,800								54,000
Depreciation Expense			20,000								10,000
Interest Expense			5,600								13,600
Dividends Declared			36,000								7,000
Accumulated Depreciation						$	157,000							$	57,000
Accounts Payable							115,600								60,200
Bonds Payable							75,000								191,000
Bond Premium							1,200
Common Stock							187,000								87,000
Retained Earnings							217,000								37,000
Sales							207,000								128,000
Interest Income															5,600
Income from Service Corp.							33,600
Total		$	993,400			$	993,400			$	565,800			$	565,800
e. Prepare a three-part consolidated worksheet for 20X2. (Values in the first two columns (the "parent" and "subsidiary" balances) that are to be deducted should be indicated with a minus sign, while all values in the "Consolidation Entries" columns should be entered as positive values. For accounts where multiple adjusting entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet.)

Porter Co. Service Co. DR CR Consolidated Income Statement Sales Interest Income Less: COGS Less: Depreciation Expense Less: Interest Expenses Income from Service Co. Consolidated Net Income 0 0 0 0 0 0 0 0 0 0 NCI in Net Income Controlling Interest in Net Income Statement of Retained Earnings Beginning Balance Net Income Less: Dividends Declared Ending Balance Balance Sheet 0 0 0 0 0 Assets Cash and Accounts Receivable Inventory Buildings & Equipment Less: Accumulated Depreciation Investment in Porter Co. Bonds Investment in Service Corporation Stock Total Assets 0 0 0 0 0 Liabilities & Equity Accounts Payable Bonds Payable Bond Premium Common Stock Retained Earnings ENCI in NA of Service Co. Total Liabilities & Equity 0 0 0 0 Porter Co. Service Co. DR CR Consolidated Income Statement Sales Interest Income Less: COGS Less: Depreciation Expense Less: Interest Expenses Income from Service Co. Consolidated Net Income 0 0 0 0 0 0 0 0 0 0 NCI in Net Income Controlling Interest in Net Income Statement of Retained Earnings Beginning Balance Net Income Less: Dividends Declared Ending Balance Balance Sheet 0 0 0 0 0 Assets Cash and Accounts Receivable Inventory Buildings & Equipment Less: Accumulated Depreciation Investment in Porter Co. Bonds Investment in Service Corporation Stock Total Assets 0 0 0 0 0 Liabilities & Equity Accounts Payable Bonds Payable Bond Premium Common Stock Retained Earnings ENCI in NA of Service Co. Total Liabilities & Equity 0 0 0 0