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 $ 10,000 70,000 110,000 400,000 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 Prime Corporation Debit Credit $ 130,300 80,000 170,000 600.000 293,000 415,000 30,000 24.000 50,000 $ 310,000 100.000 300,000 202,080 20,000 18,000 25,000 $120,000 15,200 100,000 4,800 100,000 20.000 215,000 250.000 30,000 200.000 337,500 500,000 20,000 $1.293,300 $1,793,300 3855,000 1855,000 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 512,000. 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 straight line depreciation and that no property, plant and equipment has been purchased since the acquisition Required: a. Prepare the 20x7 journal entries recorded on Prime's books related to its investment in Steak if Prime uses the equity method (If no entry is required for a transaction/event, select "No Journal entry required" in the first account field.) Required: a. Prepare the 20x7 journal entries recorded on Prime's books related to its investment in Steak if Prime uses the equity method. entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet A B C D E F G Record Prime Corp.'s 80% share of Steak Co.'s 20x7 income. Note: Enter debits before credits Event General Journal Dobil Credit 1 Record entry Clear entry View general journal b. Prepare all consolidation entries needed to complete a consolidation worksheet as of December 31, 2007. (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 Record the basic consolidation entry Note: Enter debits before credits Account Delt Credit Entry 1 Record entry Clear entry View consolidation entries c. Prepare a three-part consolidation worksheet as of December 31, 20X7 (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.) PRIME CORPORATION & SUBSIDIARY Consolidated Financial Statement Worksheet For 20X7 Consolidation Entries Prime Corp Steak Co DR CR Consolidated Income Statement Sales Other income Less. COGS Less: Depreciation experte Less Other Expenses Income from Steak Company Consolidated Net Income NCIn Net Income Controlling Interest in Net Income Statement of Retained Earings Beginning Balance Net Income Less: Dividends Declared Ending Balance Balance Sheet Cash Accounts Receivable Inventory Guildings & Equipment Less Accumulated Depreciation Investment in Steak Company Total Assets Accounts Payable Boods Payable Bond Premium Common Stock Additional Pidin Capital Retained Earnings NCHI NA of Steak Company Total Liabilities & Equity a. Prepare a consolidated income statement, Dalance sheet, and retained earnings statement for 2UXX. Prime Corporation and Subsidiary Consolidated Income Statement Year Ended December 31, 2007 Print Income to Controlling Interest a rences Prime Corporation and Subsidiary Consolidated Balance Sheet Year Ended December 31, 20X? Assets Total Current Assets Total Assets Liabilities Stockholders' Equity Controlling Internet Total Controlling Total Stockholders' Equity Total Labs and Stoholders' Equity Me 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 $ 10,000 70,000 110,000 400,000 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 Prime Corporation Debit Credit $ 130,300 80,000 170,000 600.000 293,000 415,000 30,000 24.000 50,000 $ 310,000 100.000 300,000 202,080 20,000 18,000 25,000 $120,000 15,200 100,000 4,800 100,000 20.000 215,000 250.000 30,000 200.000 337,500 500,000 20,000 $1.293,300 $1,793,300 3855,000 1855,000 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 512,000. 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 straight line depreciation and that no property, plant and equipment has been purchased since the acquisition Required: a. Prepare the 20x7 journal entries recorded on Prime's books related to its investment in Steak if Prime uses the equity method (If no entry is required for a transaction/event, select "No Journal entry required" in the first account field.) Required: a. Prepare the 20x7 journal entries recorded on Prime's books related to its investment in Steak if Prime uses the equity method. entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet A B C D E F G Record Prime Corp.'s 80% share of Steak Co.'s 20x7 income. Note: Enter debits before credits Event General Journal Dobil Credit 1 Record entry Clear entry View general journal b. Prepare all consolidation entries needed to complete a consolidation worksheet as of December 31, 2007. (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 Record the basic consolidation entry Note: Enter debits before credits Account Delt Credit Entry 1 Record entry Clear entry View consolidation entries c. Prepare a three-part consolidation worksheet as of December 31, 20X7 (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.) PRIME CORPORATION & SUBSIDIARY Consolidated Financial Statement Worksheet For 20X7 Consolidation Entries Prime Corp Steak Co DR CR Consolidated Income Statement Sales Other income Less. COGS Less: Depreciation experte Less Other Expenses Income from Steak Company Consolidated Net Income NCIn Net Income Controlling Interest in Net Income Statement of Retained Earings Beginning Balance Net Income Less: Dividends Declared Ending Balance Balance Sheet Cash Accounts Receivable Inventory Guildings & Equipment Less Accumulated Depreciation Investment in Steak Company Total Assets Accounts Payable Boods Payable Bond Premium Common Stock Additional Pidin Capital Retained Earnings NCHI NA of Steak Company Total Liabilities & Equity a. Prepare a consolidated income statement, Dalance sheet, and retained earnings statement for 2UXX. Prime Corporation and Subsidiary Consolidated Income Statement Year Ended December 31, 2007 Print Income to Controlling Interest a rences Prime Corporation and Subsidiary Consolidated Balance Sheet Year Ended December 31, 20X? Assets Total Current Assets Total Assets Liabilities Stockholders' Equity Controlling Internet Total Controlling Total Stockholders' Equity Total Labs and Stoholders' Equity Me 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