Part 2

Continuing in time from Part 1: Portsmouth found that a $10,000 impairment of goodwill took place during 20X4. At the end of 20X4, Portsmouth owed Sandusky $25,000, and Sandusky owed Portsmouth $45,000. Here the trial balance data for Portsmouth and Sandusky on December 31, 20X4:

__Portsmouth Sandusky__

Debits:

Cash $ 290,000 $ 100,000

Accounts Receivable 210,000 190,000

Inventory 400,000 50,000

Land 300,000 100,000

Buildings & Equipment-Net 1,100,000 330,000

Patent 0 40,000

Investment in Sandusky 756,000 0

Cost of Goods Sold 550,000 220,000

Depreciation Expense 130,000 45,000

Other Expenses 20,000 35,000

Dividends Declared 100,000 50,000

$3,856,000 $1,160,000

Credits:

Accounts Payable $ 300,000 $ 90,000

Bonds Payable 1,200,000 20,000

Common Stock 1,000,000 400,000

Additional Paid in Capital - 50,000

Retained Earnings, Jan. 1 350,000 150,000

Sales 910,000 450,000

Income from Subsidiary 96,000 0

$3,856,000 $1,160,000

Required:

A. Prepare the journal entries Portsmouth made during 20X4 related to its investment in Sandusky.

B. Prepare the consolidation/eliminating entries needed to consolidate the two companies at the end of 20X4.

C. Prepare the consolidation working paper for December 31, 20X4. Put required CEs/EEs in their proper columns. Use a coding system. Use Figure 5-4 as a general guide for the format. Remember to do the format requirements in the syllabus, such as Dates, Company name (i.e., parent identified), Name of statement, Dollar Signs, Commas, and Underlines.

Check Figures:

Net Assets: $3,285,000

NCI in Net Income of Sandusky: $24,000

NCI in Net Assets of Sandusky: $189,000