Question
Pizza Corporation acquired 80 percent ownership of Slice Products Company on January 1, 20X1, for $147,000. On that date, the fair value of the noncontrolling
Pizza Corporation acquired 80 percent ownership of Slice Products Company on January 1, 20X1, for $147,000. On that date, the fair value of the noncontrolling interest was $36,750, and Slice reported retained earnings of $41,000 and had $96,000 of common stock outstanding. Pizza has used the equity method in accounting for its investment in Slice. Trial balance data for the two companies on December 31, 20X5, are as follows:
| Pizza Corporation | Slice Products Company | ||||||||||||
| Item | Debit | Credit | Debit | Credit | |||||||||
| Cash & Receivables | $ | 85,000 | $ | 83,000 | |||||||||
| Inventory | 263,000 | 94,000 | |||||||||||
| Land | 85,000 | 85,000 | |||||||||||
| Buildings & Equipment | 503,000 | 165,000 | |||||||||||
| Investment in Slice Products Company | 183,340 | ||||||||||||
| Cost of Goods Sold | 114,000 | 41,000 | |||||||||||
| Depreciation Expense | 22,000 | 12,000 | |||||||||||
| Inventory Losses | 12,000 | 6,000 | |||||||||||
| Dividends Declared | 47,000 | 25,200 | |||||||||||
| Accumulated Depreciation | $ | 203,000 | $ | 84,000 | |||||||||
| Accounts Payable | 40,000 | 19,000 | |||||||||||
| Notes Payable | 225,880 | 118,200 | |||||||||||
| Common Stock | 298,000 | 96,000 | |||||||||||
| Retained Earnings | 312,000 | 86,000 | |||||||||||
| Sales | 200,000 | 108,000 | |||||||||||
| Income from Slice Products Company | 35,460 | ||||||||||||
| $ | 1,314,340 | $ | 1,314,340 | $ | 511,200 | $ | 511,200 | ||||||
Required: a. Prepare all journal entries that Pizza recorded during 20X5 related to its investment in Slice. b. Prepare all consolidation entries needed to prepare consolidated statements for 20X5. c. Prepare a three-part worksheet as of December 31, 20X5. (Values in the first two columns (the "parent" and "subsidiary" balances) that are to be deducted should be indicated with a minus sign, while all values in the "Consolidation Entries" columns should be entered as positive values. For accounts where multiple adjusting entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet.)
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