Parrot Corporation acquired 90% of Swallow Co. on January 1, 2014 for $27,000 cash when Swallow's stockholders' equity consisted of $10,000 of Capital Stock and $5,000 of Retained Earnings. The difference between the fair value and book value of Swallow's net assets was allocated solely to a patent amortized over 5 years. The separate company statements for Parrot and Swallow appear in the first two columns of the partially completed consolidation working papers.

Complete the consolidation working papers for Parrot and Swallow for the year 2014.

2. Packo Company acquired all the voting stock of Sennett Corporation on January 1, 2014 for $90,000 when Sennett had Capital Stock of $50,000 and Retained Earnings of $8,000. The excess of fair value over book value was allocated as follows: (1) $5,000 to inventories (sold in 2014), (2) $16,000 to equipment with a 4-year remaining useful life (straight-line method of depreciation) and (3) the remainder to goodwill.

Financial statements for Packo and Sennett at the end of the fiscal year ended December 31, 2015 (two years after acquisition) appear in the first two columns of the partially completed consolidation working papers. Packo has accounted for its investment in Sennett using the equity method of accounting.

Complete the consolidation working papers for Packo Company and Subsidiary for the year ending December 31, 2015.

3. Pennack Corporation purchased 75% of the outstanding stock of Shing Corporation on January 1, 2014 for $300,000 cash. At the time of the purchase, the book value and fair value of Shing's assets and liabilities were equal. Shing's balance sheet at the time of acquisition and December 31, 2014 are shown below.

Jan 1, 2014 Dec 31, 2014

Cash $75,000 80,000

Other current assets 175,000 160,000

Plant Assets net 250,000 240,000

Total assets 500,000 480,000

Liabilities 100,000 50,000

Capital stock 100,000 100,000

Retained earnings 300,000 330,000

Total liabilities and equity 500,000 480,000

Shing earned $60,000 in income during the year and paid out $30,000 in dividends. Pennack uses the equity method to account for its investment in Shing.

Part 1: Calculate Pennack's net income from Shing in 2014.

Part 2: Calculate the noncontrolling interest share in Shing's income for 2014.

Part 3: Calculate the balance in the Investment in Shings account reported on Pennack's separate general ledger at December 31, 2014.

Part 4: Calculate the non controlling interest that will be reported on the consolidated balance sheet at December 31, 2014

4. Salli Corporation regularly purchases merchandise from their 90% owner, Playtime Corporation. Playtime purchased the 90% interest at a cost equal to 90% of the book value of Salli's net assets. At the time of acquisition, the book values and fair values of Salli's assets and liabilities were equal. Playtime makes their sales to Salli at 120% of cost. In 2014, Salli reported net income of $460,000, and made purchases totaling $172,000 from Playtime. Although Salli had no inventory on hand at the beginning of 2014 that they had purchased from Playtime, at year end, they had $51,600 of this merchandise in inventory.

Part 1: Determine the unrealized profit in Salli's inventory at December 31, 2014.

Part 2: Compute Playtime's income from Salli for 2014.

Psalm Enterprises owns 90% of the outstanding voting stock of Solomon Siding, which was purchased at a cost equal to 90% of the book value of Solomon's net assets many years ago. (At the time of purchase, the fair value and book value of Solomon's net assets were equal.) Psalm purchases merchandise from Solomon at 110% above Solomon's cost. In 2014, intercompany sales from Solomon to Psalm amounted to $362,000. Unrealized profits in Psalm's December 31, 2013 inventory and December 31, 2014 inventory were $82,000 and $26,000, respectively. Solomon reported net income of $980,000 for 2014.

Part 1: Determine Psalm's income from Solomon for 2014.

Part 2: In General Journal format, prepare consolidation working paper entries at December 31, 2014 to eliminate the effects of the intercompany inventory sales assuming the perpetual inventory method is used.