Penguin Corporation paid $16,200 for a 90% interest in Seagull Corporation on January 1, 2019, when Seagull stockholders' equity consisted of $10,000 Capital Stock and $3,000 of Retained Earnings. The excess cost over book value was attributable to goodwill.

Additional information:

1. All intercompany sales of inventory are made at 120% of cost. During 2019, Seagull 's sales to Penguin were $4,800, of which half of the merchandise remained in Penguin 's inventory at December 31, 2019. (The 2019 ending inventory was sold in 2020.) During 2020, Penguin's sales to Seagull were $6,000 of which 60% remained in Seagull's inventory at December 31, 2020. At year-end 2020, Seagull owed Penguin $1,500 for the inventory purchased during 2020.

2. Penguin Corporation sold equipment with a book value of $2,000 and remaining useful life of four years and no salvage value to Seagull Corporation on January 1, 2020 for $2,800. Straight-line depreciation is used.

3. Separate company financial statements for Penguin Corporation and Subsidiary at December 31, 2020 are summarized in the first two columns of the consolidation working papers.

4. The following information is available for 2019:

Seagull's income $4,000 - Seagull's dividends received by Penguin $1,800

 

Required: 1) Prepare all elimination entries in 2020 (Including the entries not affecting the consolidated Income statement). Show all your calculations. 2) Complete the working papers to consolidate the financial statements of Penguin Corporation and subsidiary for the year ended December 31, 2020. Penguin Seagull Eliminations Consolidated Debit Credit INCOME STATEMENT Sales $60,000 $14,000 4, 560 income from Seagull Gain on equipment sale 800 Cost of Sales (26,000) (4,400) Other Expenses Noncontrolling imterest share (28,000) (3,600) Net income $11,360 $6,000 Retained Earnings 1/1 $9,500 $5,000 Add: Net income 11,360 6,000 Dividends (7,000) (2,000) Retained Earnings 12/31 $ 13,860 $9,000 BALANCE SHEET Cash $5,500 $ 3,000 Receivables Inventories Equipment-net 7,000 4,000 10,000 4,500 24,000 9,000 Land 4,000 3,500 Investment in Seagull 20,400 Goodwill TOTAL ASSETS $70,900| $24,000 LIAB. & EQUITY Accounts payable $7,040| $ 5,000 Capital Stock Retained Earnings 1/1 Noncntrl. Interest 50,000 10,000 13,860 9,000 12/31 Nonentrl. Interest TOTAL LIAB. & EQUITIES $ 70,900| $24,000