Parent Corporation acquired a 70 percent interest in Subsidiary Corporations outstanding voting common stock

on January 1, 2011, for $735,000 cash. The stockholders equity of Subsidiary on this date consisted of $750,000

capital stock and $150,000 retained earnings. The difference between the fair value of Subsidiary and the

underlying equity acquired in Subsidiary was assigned $7,500 to Subsidiarys undervalued inventory, $21,000 to

undervalued buildings, $31,500 to undervalued equipment, and remainder assigned to goodwill.

The undervalued inventory items were Sold during 2011, and the undervalued buildings and equipment had

remaining useful lives of seven years and three years, respectively. Depreciation is straight line.

At December 31, 2011, Subsidiarys accounts payable include $10,000 owed to Parent. This $10,000 account

payable is due on January 15, 2012. Parent sold equipment to outsiders with a book value of $15,000 for $25,000

on June 1, 2011. This is not an intercompany sale transaction. Separate financial statements for Parent and

Subsidiary for 2011 are shown on the consolidated worksheet tab (in thousands):

REQUIRED

: Prepare consolidation workpapers for Parent Corporation and Subsidiary for the year ended

12/31/2011. (Use the accompanying excel Worksheet for your solution).

You must follow these steps in order:

1. Complete the Preliminary Computation Tab first

2. Complete the Journal Entries located at the bottom of the worksheet

3. Your numbers from the Journal entries should roll up to the Financial Trial Balance at the top of the worksheet

(i.e. you should not input any data manually to the trial balance)

Note: your worksheet should balance provided that your preliminary computations and journals are correct and

Debits are equal to Credit