Paulee Corporation paid $24,800 for an 80% interest in Sergio Corporation on January 1, 2016, at which time Sergio's stockholders' equity consisted of $15,000 of Common Stock and $6,000 of Retained Earnings. The fair values of Sergio Corporation's assets and liabilities were identical to reorded book values when Paulee acquired its 80% interest.

Sergio Corporation reported net income of $4,000 and paid dividends of $2,000 during 2016. Paulee Corporation sold inventory items to Sergio during 2016 and 2017 as follows:

	2016	2017
Paulee's sales to Sergio	$5,000	$6,000
Paulee's cost of sales to Serigo	3,000	3,500
Unrealized profit at year-end	1,000	1,500

At December 31, 2017, the accounts payable of Sergio include $1,500 owed to Paulee for inventory purchases.

Financial statements of Paulee and Sergio appear in the first two columns of the partially completed working papers.

REQUIRED:

1. Show all preliminary computations (5 pts)

	Paulee	Sergio	Eliminations- Debit	Eliminations-Credit	Non-controlling interest
INCOME STATEMENT Sales	$43,000	$20,000
Income from Sergio	6,700
Cost of Sales	(22,000)	(8,000)
Other expenses Non-controlling interest Expense	(12,200)	(3,000)
Net Income	15,500	9,000
RETAINED EARNINGS Retained Earnings 1/1	9,000	8,000
Add: Net Income	15,500	9,000
Less: Dividends	(10,000)	(5,000)
Retained Earnings 12/31	$14,500	$12,000
BALANCE SHEET Cash	5,400	3,000
Accounts Receivable- Net	14,000	10,000
Dividend Receivable	2,000
Inventories	18,000	8,000
Goodwill
Equipment and Buildings- Net	24,000	31,000
Investment in Sergio	28,100
TOTAL ASSETS	$91,500	$52,000
LIAB. & EQUITY Accounts payable	17,500	12,500
Dividend payable	7,000	2,500
Other Debt	12,500	10,000
Capital Stock	40,000	15,000
Retained Earnings	14,500	12,000
1/1 Noncontrl Interest
12/31 Noncontrl Interest
LIAB. & EQUITY	$91,500	$52,000