Prime Corporation acquired 80 percent of Steak Company's voting shares on January 1,204, 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 31,207, are as follows: 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 206, Steak Company sold inventory costing $40,000 to Prime Corporation for $60,000, and Prime resold 60 percent of the inventory in 206 and 40 percent in 207. Also in 206, Prime sold inventory costing $20,000 to Steak for $26,000. Steak resold two-thirds of the inventory in 206 and one-third in 207. 3. During 207, 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 207. Steak continues to hold all the units purchased from Prime during 207. 4. Steak owes Prime $10,000 on account on December 31,207. 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 207 journal entries recorded on Prime's books related to its investment in Steak if Prime uses the equity method. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Prepare all consolidation entries needed to complete a consolidation worksheet as of December 31,207. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Consolidation Worksheet Entries B C D E E F Record the basic consolidation entry. Note: Enter debits before credits. Prepare a three-part consolidation worksheet as of December 31, 207. Note: 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. d. Prepare a consolidated income statement, balance sheet, and retained earnings statement for 207. \begin{tabular}{|l|l|} \hline \multicolumn{2}{|c|}{ Prime Corporation and Subsidiary } \\ \hline \multicolumn{1}{|c|}{ Consolidated Statement of Retained Earnings } \\ \hline \multicolumn{1}{|c|}{ Year Ended December 31, 20X7 } \\ \hline Retained Earnings, January 1, 20X7 & \\ \hline Income to Controlling Interest, 20X7 & \\ \hline & $ \\ \hline Dividends Declared, 20X7 & \\ \hline Retained Earnings, December 31, 20X7 & \\ \hline \end{tabular} Prime Corporation acquired 80 percent of Steak Company's voting shares on January 1,204, 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 31,207, are as follows: 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 206, Steak Company sold inventory costing $40,000 to Prime Corporation for $60,000, and Prime resold 60 percent of the inventory in 206 and 40 percent in 207. Also in 206, Prime sold inventory costing $20,000 to Steak for $26,000. Steak resold two-thirds of the inventory in 206 and one-third in 207. 3. During 207, 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 207. Steak continues to hold all the units purchased from Prime during 207. 4. Steak owes Prime $10,000 on account on December 31,207. 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 207 journal entries recorded on Prime's books related to its investment in Steak if Prime uses the equity method. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Prepare all consolidation entries needed to complete a consolidation worksheet as of December 31,207. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Consolidation Worksheet Entries B C D E E F Record the basic consolidation entry. Note: Enter debits before credits. Prepare a three-part consolidation worksheet as of December 31, 207. Note: 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. d. Prepare a consolidated income statement, balance sheet, and retained earnings statement for 207. \begin{tabular}{|l|l|} \hline \multicolumn{2}{|c|}{ Prime Corporation and Subsidiary } \\ \hline \multicolumn{1}{|c|}{ Consolidated Statement of Retained Earnings } \\ \hline \multicolumn{1}{|c|}{ Year Ended December 31, 20X7 } \\ \hline Retained Earnings, January 1, 20X7 & \\ \hline Income to Controlling Interest, 20X7 & \\ \hline & $ \\ \hline Dividends Declared, 20X7 & \\ \hline Retained Earnings, December 31, 20X7 & \\ \hline \end{tabular}