Prime Corporation acquired 80 percent of Steak Company's voting shares on January 1, 20X4, for $302.720 in cash and marketable securities. At that date, the noncontrolling interest had a fair value of $75,680 and Steak reported net assets of $328,400. Assume Prime uses the fully adjusted equity method. Trial balances for the two companies on December 31, 20X7, are as follows Prine Corporation Debit $ 137,300 87,000 177,000 670,000 314,8s0 423,600 30,000 31,000 57,000 Item Cash Accounts Recelivable Inventory Buildings & Equipnent Investment in Steak Company Cost of Goods Sold Depreciation Expense Other Expenses Dividends Declared Accumulated Depreciation Accounts Payable Bonds Payable Bond Premium Common Stock Additional Paid-in Capital Retained Earnings Sales Other Income Income from Steak Company Steak Company. Debit $ 17,000 77,000 117,000 470,000 Credit Credit 209,000 20, 000 25,000 32, 000 $ 317,000 107,000 370,000 $106, 000 22, 200 170,000 4,400 107,000 16,000 239,400 207,000 354, 720 514,000 27,400 30,660 265, 000 37,000 $1,927, 780 $1,927,780 $967,000 1967,000 Total Additional Informetion 1. The full amount of the differential at acquisition was assigned to buildings and equipment with a remaining 10-year economic life 2. Prime and Steak regularly purchase inventory from each other. During 20X6, Steak Company sold inventory costing $32.500 to Prime Corporation for $50,000, and Prime resold 60 percent of the inventory in 20X6 and 40 percent in 20X7 Also in 20X6, Pime sold inventory costing $22.500 to Steak for $30,000, Steak resold two-thirds of the inventory in 20x6 and one-third in 20X7 3. During 20X7, Steak sold inventory costing $27.300 to Prime for $42,000, and Prime soid items purchased for $12.000 to Steak for $16,000. Before the end of the year, Prime resold one third of the inventory it purchased from Steak in 20X7 Steak continues to hold all the units purchased from Prime during 20X7 4ASA E Accumulated Depreclation Accounts Payable Bonds Payable Bond Premium 17,000 107,000 370,000 $106,000 22, 200 170,000 4,400 107, 000 16, 00 239,400 265, 000 37,000 Common Stock Additional Paid-in Capital Retained Earnings Sales Other Income Income froe Steak Company 207,000 354,720 514,000 27,400 30,660 $1,927, 700 Total $1,927, 780 $967,000 S967, 000 Additional Informetion 1. The full amount of the differential at acquisition was assigned to buildings and equipment with a remaining 10 year economic life. 2 Prime and Steak regularly purchase inventory from each other. During 20X6, Steak Company sold inventory costing $32,500 to Prime Corporation for $50,000, and Prime resold 60 percent of the inventory in 20X6 and 40 percent in 20X7. Also in 20X6, Prime sold inventory costing $22,500 to Steak for $30,000 Steak resold two-thirds of the inventory in 20X6 and one-third in 20X7 3. During 20x7, Steak sold inventory costing $27,300 to Prime for $42,000, and Prime sold items purchased for $12.000 to Steak for $16,000. Before the end of the year, Prime resold one-third of the inventory it purchased from Steak in 20X7 Steak continues to hold all the units purchased from Prime during 20X7 4. Steak owes Prime $12.000 on account on December 31, 20X7. 5. Assume that both companies use straight-line depreciation and that no property, plant, and equipment has been purchased since the acquisition. On December 31, 20x7, Prime Corporation recorded the following entry on its books to adjust from the fully adjusted equity method to the modified equity method for its investment in Steak Company stock Credit Debit 11,840 General Journal Investment in Steak Company Stock Retained Earnings Income from Steak Company 8,100 3,740 Besuirec Required: a. Show the effects of the data which is reported by Prime in the trial balance for the preceding adjusting entry. PRIME CORPORATION STEAK COMPANY Item Debit Credit Debit Credit Cash Accounts receivable Inventory Buildings and equipment Investment in Steak Company Cost of goods sold Depreciation expense Other expenses Dividends declared Accumulated depreciation Accounts payable Bonds payable Bond premium Common stock Additional Paid-in capital Retained earnings Sales Other income Income from subsidiary Total b. Prepare the journal entries that would have been recorded on Prime's books during 20X7 under the modified equity method (f no entry is required for a transection/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet A Record Prime Corp.'s no% share of Steak Co.'s 20x7 income. Note: Enter debits before credits. Event General Journal Debit Credit Record entry Clear entry View general journal c. Prepare all consolidation entries needed to complete a consolidation worksheet at December 31, 20X7, assuming Prime has used the modified equity method. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) view transaction list Consolidation Worksheet Entries BCDE F Record the basic consolidation entry. Note: Enter debita before credits. Accounts Debit Credit Entry d. Prepare the three-part consolidation worksheet as of December 31, 20X7 (Velues in the first two columns (the "parent" end "subsidiary" balances) thet are to be deducted should be indicated with a minus sign, while al values in the "Consolidetion Entries" columns should be entered as positive values. For accounts where multiple adjusting entries ere required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similerly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet.) PRIME CORPORATION & SUDSIDIARY Consolidated Financial Statement Worksheet For 20X7 Consolidation Entrles Prime Corp. Steak Co. DR CR Consolidated Income Statement Sales Other Income Less COGS Less Depreciation Expense Less Other Expenses Income from Steak Company 0. Consolidated Net Income NCI in Net Income 05 Controlling Interest in Net Income Statement of Retained Earnings Beginning Balance Net Iricome Less Dividends Declared Ending Balance Balance Sheet Seved Less: Other Expenses Income from Steak Company Consolidated Net Income NCI in Net Income 0. Controlling Interest in Net Income Statement of Retained Earnings 5 Beginning Balance Net Income Less Dividends Declared Ending Balance $ Balance Sheet Cash Accounts Receivable Inventory Buildings & Equipment Less Accumulated Depreciation Investment in Steak Company Total Assets $ Accounts Payable Bonds Payable Bond Premium Common Stock Additional Paid-in Capital Retained Earnings NCI in NA of Steak Company Total Liabilities & Equity 5 %24