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Pony Corporation acquired all of Stallion Companys common shares on January 1, 20X5, for $180,000. On that date, the book value of the net assets

Pony Corporation acquired all of Stallion Companys common shares on January 1, 20X5, for $180,000. On that date, the book value of the net assets reported by Stallion was $150,000. The entire differential was assigned to depreciable assets with a six-year remaining economic life from January 1, 20X5. The adjusted trial balances for the two companies on December 31, 20X5, are as follows:

Pony Corporation Stallion Company
Item Debit Credit Debit Credit
Cash $ 15,000 $ 5,000
Accounts Receivable 30,000 40,000
Inventory 70,000 60,000
Depreciable Assets (net) 325,000 225,000
Investment in Stallion Company 195,000
Depreciation Expense 25,000 15,000
Other Expenses 105,000 75,000
Dividends Declared 40,000 10,000
Accounts Payable $ 50,000 $ 40,000
Notes Payable 100,000 120,000
Common Stock 200,000 100,000
Retained Earnings 230,000 50,000
Sales 200,000 120,000
Income from Stallion Company 25,000
$ 805,000 $ 805,000 $ 430,000 $ 430,000

Pony uses the equity method in accounting for its investment in Stallion. Stallion declared and paid dividends on December 31, 20X5. Required: a. Prepare the consolidation entries needed as of December 31, 20X5, to complete a consolidation worksheet. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

b. Prepare a three-part consolidation 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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