Prime Company holds 80 percent of Suspect Companys stock, acquired on January 1, 20X2, for $182,000. On the acquisition date, the fair value of the noncontrolling interest was $45,500. Suspect reported retained earnings of $50,000 and had $100,000 of common stock outstanding. Prime uses the fully adjusted equity method in accounting for its investment in Suspect.

Trial balance data for the two companies on December 31, 20X6, are as follows:

Additional Information

1. At the date of combination, the book values and fair values of all separately identifiable assets and liabilities of Suspect were the same. At December 31, 20X6, the management of Prime reviewed the amount attributed to goodwill as a result of its purchase of Suspect stock and concluded an impairment loss of $20,475 should be recognized in 20X6 and shared proportionately between the controlling and noncontrolling shareholders.
2. On January 1, 20X5, Suspect sold land that had cost $9,000 to Prime for $20,250.
3. On January 1, 20X6, Prime sold to Suspect equipment that it had purchased for $82,500 on January 1, 20X1. The equipment has a total economic life of 15 years and was sold to Suspect for $69,500. Both companies use straight-line depreciation.
4. There was $7,000 of intercompany receivables and payables on December 31, 20X6.

Required:

1. Give all consolidation entries needed to prepare a consolidation worksheet for 20X6.
   1. Record the basic consolidation entry.
   2. Record the amortized excess value reclassification entry.
   3. Record the excess value (differential) reclassification entry.
   4. Record the entry to eliminate the intercompany receivable/payable.
   5. Record the entry to eliminate the gain on the sale of land.
   6. Record the entry to eliminate the gain on the equipment and to correct the asset's basis.
   7. Record the entry to adjust Accumulated Depreciation.
2. Prepare a three-part worksheet for 20X6
3. Prepare a consolidated balance sheet, income statement, and retained earnings statement for 20X6

\begin{tabular}{|c|c|c|c|c|} \hline \multirow[b]{2}{*}{ Item } & \multicolumn{2}{|c|}{ Prime Company } & \multicolumn{2}{|c|}{ Suspect Company } \\ \hline & Debit & Credit & Debit & Credit \\ \hline Cash and Accounts Receivable & $116,000 & & $37,000 & \\ \hline Inventory & 261,000 & & 86,000 & \\ \hline Land & 70,000 & & 85,000 & \\ \hline Buildings and Equipment & 530,000 & & 130,000 & \\ \hline Investment in Suspect Company & 209,970 & & & \\ \hline Cost of Goods Sold & 174,000 & & 82,800 & \\ \hline Depreciation and Amortization Expense & 26,500 & & 13,000 & \\ \hline Other Expenses & 17,000 & & 7,000 & \\ \hline Dividends Declared & 30,000 & & 5,000 & \\ \hline Accumulated Depreciation & & $217,300 & & $39,000 \\ \hline Accounts Payable & & 62,000 & & 21,000 \\ \hline Bonds Payable & & 200,000 & & 45,000 \\ \hline Common Stock & & 300,000 & & 100,000 \\ \hline Retained Earnings & & 308,340 & & 60,800 \\ \hline Sales & & 300,000 & & 180,000 \\ \hline Gain on Sale of Equipment & & 14,500 & & \\ \hline Income from Suspect Company & & 32,330 & & \\ \hline Total & $1,434,470 & $1,434,470 & $445,800 & $445,800 \\ \hline \end{tabular} \begin{tabular}{|c|c|c|c|c|c|} \hline Income Statement & & & & & \\ \hline Sales & & & & & \\ \hline Gain on Sale of Equipment & & & & & \\ \hline Less: COGS & & & & & \\ \hline Less: Depreciation and Amortization Exp & & & & ? & \\ \hline Less: Other Expenses & & & & 7 & \\ \hline Less: Goodwill Impairment Loss & & & & & \\ \hline Income from Suspect Company & & & & & \\ \hline Consolidated Net Income & 0 & 0 & 0 & 0 & 0 \\ \hline NCl in Net Income & & & & & \\ \hline Controlling Interest in Net Income & 0 & 0 & 0 & 0 & 0 \\ \hline Statement of Retained Earnings & & & & & \\ \hline Beginning Balance & & & & & \\ \hline Net Income & & & & & \\ \hline Less: Dividends Declared & & & & & \\ \hline Ending Balance & 0 & 0 & 0 & 0 & 0 \\ \hline Balance Sheet & & & & & \\ \hline Cash and Accounts Receivable & & & & & \\ \hline Inventory & & & & & \\ \hline Land & & & & & \\ \hline Buildings \& Equipment & & & & & \\ \hline Less: Accumulated Depreciation & & & & & \\ \hline Investment in Suspect Company & & & & & \\ \hline Goodwill & & & & & \\ \hline Total Assets & 0 & 0 & 0 & 0 & 0 \\ \hline Accounts Payable & & & & & \\ \hline Bonds Payable & & & & & \\ \hline Common Stock & & & & & \\ \hline Retained Earnings & & & & & \\ \hline NCl in Net Assets of Suspect Company & & & & & \\ \hline Total Liabilities and Equity & 0 & 0 & 0 & 0 & 0 \\ \hline \end{tabular}