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Prime Corporation acquired 100 percent ownership of Steak Products Company on January 1, 20X1, for $280,000. On that date, Steak reported retained earnings of $82,000

Prime Corporation acquired 100 percent ownership of Steak Products Company on January 1, 20X1, for $280,000. On that date, Steak reported retained earnings of $82,000 and had $116,000 of common stock outstanding. Prime has used the equity-method in accounting for its investment in Steak. The trial balances for the two companies on December 31, 20X5, appear below.

Prime Corporation Steak Products Company
Item Debit Credit Debit Credit
Cash & Receivables $ 59,000 $ 81,000
Inventory 276,000 106,000
Land 96,000 96,000
Buildings & Equipment 516,000 166,000
Investment in Steak Products 286,200
Cost of Goods Sold 136,000 66,000
Depreciation Expense 41,000 31,000
Inventory Losses 31,000 17,800
Dividends Declared 46,000 26,000
Accumulated Depreciation $ 221,000 $ 137,000
Accounts Payable 76,000 36,000
Notes Payable 232,000 30,800
Common Stock 316,000 116,000
Retained Earnings 385,200 106,000
Sales 216,000 164,000
Income from Steak Products 41,000
$ 1,487,200 $ 1,487,200 $ 589,800 $ 589,800

Additional Information:

  1. On the date of combination (five years ago), the fair value of Steaks depreciable assets was $82,000 more than the book value. Accumulated depreciation at that date was $10,000. The differential assigned to depreciable assets should be written off over the following 10-year period.
  2. There was $26,000 of intercorporate receivables and payables at the end of 20X5.

Required: a. Prepare all journal entries that Prime recorded during 20X5 related to its investment in Steak. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

b. Prepare all consolidating entries needed to prepare consolidated statements for 20X5. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

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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