Parent Corporation acquired 80% of Subsidiary Corporation on January 1, 2013 for O.R. 240,000 cash when Subsidiarys stockholders equity consisted of O.R. 100,000 of Common Stock and O.R. 30,000 of Retained Earnings. The difference between the price paid by Parent and the underlying equity acquired in Subsidiary was allocated solely to a patent amortized over 10 years. Parent sold merchandise to Subsidiary during the year in the amount of O.R. 30,000. O.R. 10,000 worth of inventory is still on hand at the end of the year with an unrealized profit of O.R. 4,000. The separate partial company statements for Parent and Subsidiary appear in the first two columns of the partially completed consolidated workpaper.

Instructions:

A. Prepare, in general journal form, all entries necessary on the 2013 consolidated statements workpaper to eliminate the effects of intercompany sales. Use the blank sheet to write the necessary elimination entries. .. (7 Marks)

B. Complete the consolidated workpaper for Parent and Subsidiary for the year 2013. .. (5 Marks)

Hint: ignore any effect on Balance Sheet accounts

Parent Corporation and Subsidiary Partially-Consolidated Statements Workpaper Eliminations Noncontrollin Consolidate P S Corp Cr Balances Corp. Dr. Interest Income Statement Sales 200,000 150,000 Dividend Income 16,000 (92,000) (23,000) (47,000) (40,000) Cost of Sales Other Expenses Noncontrolling Interest in Income Net Income 101,000 63,000 Retained Earnings Statement Retained Earnings 1/1 110,000 30,000 Add: Net Income 101,000 63,000 (20,000) (30,000) Less: Dividends Retained Earnings 73,000 12/31 181,000