prince corporation acquired 100 percent of Sword Company on January 1, 20X7, for $192,000. The trial balances for the two companies on December 31, 20X7, included the following entries:

additional information

1. On January 1, 20X7, Sword reported net assets with a book value of $137,000. A total of $22,000 of the acquisition price is applied to goodwill, which was not impaired in 20X7.
2. Swords depreciable assets had an estimated economic life of 11 years on the date of combination. The difference between fair value and book value of tangible assets is related entirely to buildings and equipment.
3. Prince used the equity-method in accounting for its investment in Sword.
4. Detailed analysis of receivables and payables showed that Sword owed Prince $25,000 on December 31, 20X

Required:

a. Prepare all journal entries recorded by Prince with regard to its investment in Sword during 20X7.

1. Record the initial investment in Sword Co.

2. Record Prince Cor's share of Sword Co.'s 20X7 income.

3. Record Prince Corp's share of Sword Co.'s 20X7 dividend.

4. Record the amortization of the excess acquisition price.

b. Prepare all consolidating entries needed to prepare a full set of consolidated financial statements for 20X7.

1. Record the basic consolidation entry.

2. Record the amortized excess value reclassification entry

3. Record the excess value (differential) reclassification entry.

4. Record the entry to eliminate the intercompany accounts.

5. Record the optional accumulated depreciation consolidation entry.

C. Prepare a three-part consolidation worksheet as of December 31, 20X7.

Sword Company Debit Credit $ 28,000 64,000 110,000 23,000 152,000 Item Cash Accounts Receivable Inventory Land Buildings and Equipment Investment in Sword Company Cost of Goods Sold Depreciation Expense Other Expenses Dividends Declared Accumulated Depreciation Accounts Payable Mortgages Payable Common Stock Retained Earnings Sales Income from Sword Company Prince Corporation Debit Credit $ 87,000 59,000 190,000 85,000 498,000 235,000 498,000 22,000 71,000 69,000 $ 138,000 56,000 182,000 297,000 385,000 691,000 65,000 $1,814,000 $1,814,000 254,000 12,000 71,000 22,000 $ 60,000 30,000 104,000 48,000 89,000 405,000 $736,000 $736,000 PRINCE CORPORATION AND SUBSIDIARY Consolidated Financial Statements Worksheet December 31, 20X7 Consolidation Entries Prince Corp Sword Co DR CR Consolidated $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Income Statement Sales Less: COGS Less: Depreciation expense Less: Other expenses Income from Sword Co. Net Income Statement of Retained Earnings Beginning balance Net income Less: Dividends declared Ending Balance Balance Sheet Assets Cash Accounts receivable Inventory Land Buildings & equipment Less: Accumulated depreciation Investment in Sword Co. Goodwill Total Assets Liabilities & Equity Accounts payable Mortgages payable Common stock Retained earnings Total Liabilities & Equity $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ Sword Company Debit Credit $ 28,000 64,000 110,000 23,000 152,000 Item Cash Accounts Receivable Inventory Land Buildings and Equipment Investment in Sword Company Cost of Goods Sold Depreciation Expense Other Expenses Dividends Declared Accumulated Depreciation Accounts Payable Mortgages Payable Common Stock Retained Earnings Sales Income from Sword Company Prince Corporation Debit Credit $ 87,000 59,000 190,000 85,000 498,000 235,000 498,000 22,000 71,000 69,000 $ 138,000 56,000 182,000 297,000 385,000 691,000 65,000 $1,814,000 $1,814,000 254,000 12,000 71,000 22,000 $ 60,000 30,000 104,000 48,000 89,000 405,000 $736,000 $736,000 PRINCE CORPORATION AND SUBSIDIARY Consolidated Financial Statements Worksheet December 31, 20X7 Consolidation Entries Prince Corp Sword Co DR CR Consolidated $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Income Statement Sales Less: COGS Less: Depreciation expense Less: Other expenses Income from Sword Co. Net Income Statement of Retained Earnings Beginning balance Net income Less: Dividends declared Ending Balance Balance Sheet Assets Cash Accounts receivable Inventory Land Buildings & equipment Less: Accumulated depreciation Investment in Sword Co. Goodwill Total Assets Liabilities & Equity Accounts payable Mortgages payable Common stock Retained earnings Total Liabilities & Equity $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $