Prime Corporation acquired 80 percent of Steak Company's voting shares on January 1, 20X4, for $280,000 in cash and marketable securities. At that date, the noncontrolling Interest had a fair value of $70,000 and Steak reported net assets of $300,000. Assume Prime uses the fully adjusted equity method. Trial balances for the two companies on December 31, 20X7, are as follows: Steak Company Debit Credit $ 19,00 70,000 118, eee 4e8,eee Prime Corporation Debit Credit $ 130,300 80,000 178, eee 680,00 293,000 416,80 30,000 24,000 50,000 $ 310,000 1e8,eee 3e8,eee Item Cash Accounts Receivable Inventory Buildings & 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 Steak Company Total 202, eee 29, eee 18,888 25,00 200, eee $120,000 15, 200 100,000 4,880 1e8,eee 28,888 215,000 258,888 30,000 337,500 5e8,eee 28,489 25,400 $1,793,300 $1,793,308 $855,000 $855,000 Additional Information 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 $40,000 to Prime Corporation for $60,000, and Prime resold 60 percent of the inventory In 20x6 and 40 percent In 20x7. Also in 20X6, Prime sold Inventory costing $20,000 to Steak for $26,000. Steak resold two-thirds of the Inventory in 20x6 and one-third in 20x7. 3. During 20x7, Steak sold Inventory costing $30,000 to Prime for $45,000, and Prime sold items purchased for $9,000 to Steak for $12,000. 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 $10,000 on account on December 31, 20x7. 5. Assume that both companies use stralght-line depreciation and that no property, plant, and equipment has been purchased since the acquisition. d. Prepare a consolidated Income statement, balance sheet, and retained earnings statement for 20x7. Prime Corporation and Subsidiary Consolidated Income Statement Year Ended December 31, 20X7 Income to Controlling Interest Prime Corporation and Subsidiary Consolidated Balance Sheet Year Ended December 31, 20X7 Assets Total Current Assets Total Assets Liabilities Stockholders' Equity: Controlling Interest: Total Controlling Interest: Total Stockholders' Equity: Total Liabilities and Stockholders' Equity Prime Corporation and Subsidiary Consolidated Statement of Retained Earnings Year Ended December 31, 20X7 Retained Earnings, January 1, 20X7 Income to Controlling Interest, 20X7 Dividends Declared, 20X7 Retained Earnings. December 31, 20X7 Prime Corporation acquired 80 percent of Steak Company's voting shares on January 1, 20X4, for $280,000 in cash and marketable securities. At that date, the noncontrolling Interest had a fair value of $70,000 and Steak reported net assets of $300,000. Assume Prime uses the fully adjusted equity method. Trial balances for the two companies on December 31, 20X7, are as follows: Steak Company Debit Credit $ 19,00 70,000 118, eee 4e8,eee Prime Corporation Debit Credit $ 130,300 80,000 178, eee 680,00 293,000 416,80 30,000 24,000 50,000 $ 310,000 1e8,eee 3e8,eee Item Cash Accounts Receivable Inventory Buildings & 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 Steak Company Total 202, eee 29, eee 18,888 25,00 200, eee $120,000 15, 200 100,000 4,880 1e8,eee 28,888 215,000 258,888 30,000 337,500 5e8,eee 28,489 25,400 $1,793,300 $1,793,308 $855,000 $855,000 Additional Information 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 $40,000 to Prime Corporation for $60,000, and Prime resold 60 percent of the inventory In 20x6 and 40 percent In 20x7. Also in 20X6, Prime sold Inventory costing $20,000 to Steak for $26,000. Steak resold two-thirds of the Inventory in 20x6 and one-third in 20x7. 3. During 20x7, Steak sold Inventory costing $30,000 to Prime for $45,000, and Prime sold items purchased for $9,000 to Steak for $12,000. 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 $10,000 on account on December 31, 20x7. 5. Assume that both companies use stralght-line depreciation and that no property, plant, and equipment has been purchased since the acquisition. d. Prepare a consolidated Income statement, balance sheet, and retained earnings statement for 20x7. Prime Corporation and Subsidiary Consolidated Income Statement Year Ended December 31, 20X7 Income to Controlling Interest Prime Corporation and Subsidiary Consolidated Balance Sheet Year Ended December 31, 20X7 Assets Total Current Assets Total Assets Liabilities Stockholders' Equity: Controlling Interest: Total Controlling Interest: Total Stockholders' Equity: Total Liabilities and Stockholders' Equity Prime Corporation and Subsidiary Consolidated Statement of Retained Earnings Year Ended December 31, 20X7 Retained Earnings, January 1, 20X7 Income to Controlling Interest, 20X7 Dividends Declared, 20X7 Retained Earnings. December 31, 20X7