P9-24 Sale of Subsidiary Common Shares LO 9-3 Penn Corporation purchased 80 percent ownership of State Company on January 1, 20X2, at underlying book value. At that date, the fair value of the noncontrolling Interest was equal to 20 percent of the book value of State. On January 1, 20X4, Penn sold 2,000 shares of State's stock for $75,000 to Nonaffiliated Company and recorded a $16,000 Increase in additional pald-in capital. Trial balances for the companies on December 31, 20X4, contain the following data: State Company Debit Credit $ 40,000 57,eee 107,eee 280,000 Cash Accounts Receivable Inventory Buildings & Equipment Investment in State Company Cost of Goods Sold Depreciation Expense Other Expenses Dividends Declared Accumulated Depreciation Accounts Payable Bonds Payable Common Stock ($10 par) Additional Paid-In Capital Retained Earnings Sales Income from State Total Penn Corporation Debit Credit $ 35,00 77, 127,eee 660,000 179,480 201,00 21, eee 21, eee 16,00 $ 166,00 145,800 190,000 200,000 70,eee 260,eee 278,000 27,600 $1,337,400 $1,337,480 91,800 16,eee 25,000 11,000 $ 91,000 72,eee 22,eee 100,000 24,00 140,000 178,888 $627,000 $627,000 State's net Income was earned evenly throughout the year. Both companies declared and paid their dividends on December 31, 20X4. Penn uses the equity method in accounting for its Investment In State. Required: a. Prepare the consolidation entries needed to complete a worksheet for 20X4. (If no entry is required for a transaction/event, select "No Journal entry required" In the first account field.) view transaction list Consolidation Worksheet Entries Record the basic consolidation entry. Note: Enter debits before credits Event Accounts Debit Credit Record entry Clear entry view consolidation entries b. Prepare a consolidation worksheet for 20X4. (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 deblt 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.) Consolidated PENN CORPORATION AND SUBSIDIARY Consolidated Financial Statement Worksheet December 31, 20X4 Consolidation Entries Penn Corp. State Co. DR CR Income Statement Sales Less: COGS Less: Depreciation Expense Less: Other Expenses Income from State Co. Consolidated Net Income 0 NCI in Net Income Controlling Interest in NI 0 Statement of Retained Earnings Beginning Balance Net Income Less: Dividends Declared Ending Balance 10 0 Balance Sheet Cash Accounts Receivable Inventory Buildings and Equipment Less: Accumulated Depreciation Investment in State Co. Total Assets 0 Accounts Payable Bonds Payable Common Stock Additional Paid-In Capital Retained Earnings NCI in NA of State Co. Total Liabilities & Equity 0 0 0 0
