Prince Corporation acquired 100 percent of Sword Company on January 1, 20X7, for $203,000. The trial balances for the two companies on December 31, 20X7, included the following amounts:

	Prince Corporation							Sword Company
Item	Debit			Credit1				Debit			Credit
Cash	$	82,000						$	25,000
Accounts Receivable		50,000							55,000
Inventory		170,000							100,000
Land		80,000							20,000
Buildings and Equipment		500,000							150,000
Investment in Sword Company		240,000
Cost of Goods Sold		500,000							250,000
Depreciation Expense		25,000							15,000
Other Expenses		75,000							75,000
Dividends Declared		50,000							20,000
Accumulated Depreciation				$	155,000						$	75,000
Accounts Payable					70,000							35,000
Mortgages Payable					200,000							50,000
Common Stock					300,000							50,000
Retained Earnings					290,000							100,000
Sales					700,000							400,000
Income from Sword Company					57,000
	$	1,772,000		$	1,772,000			$	710,000		$	710,000

Additional Information

1. On January 1, 20X7, Sword reported net assets with a book value of $150,000. A total of $20,000 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 $16,000 on December 31, 20X7.

Required: a. Prepare all journal entries recorded by Prince with regard to its investment in Sword during 20X7. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

• Record the initial investment in Sword Co.
• Record Prince Corp's share of Sword Co.'s 20X7 income.
• Record Prince Corp's share of Sword Co.'s 20X7 dividend.
• 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. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

• Record the basic consolidation entry.
• Record the amortized excess value reclassification entry.
• Record the excess value (differential) reclassification entry.
• Record the entry to eliminate the intercompany accounts.
• Record the optional accumulated depreciation consolidation entry.

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.)

PRINCE CORPORATION AND SUBSIDIARY
Consolidated Financial Statements Worksheet
December 31, 20X7
			Consolidation Entries
	Prince Corp	Sword Co	DR	CR	Consolidated
Income Statement
Sales
Less: COGS
Less: Depreciation expense
Less: Other expenses
Income from Sword Co.
Net Income	$0	$0	$0	$0	$0
Statement of Retained Earnings
Beginning balance
Net income
Less: Dividends declared
Ending Balance	$0	$0	$0	$0	$0
Balance Sheet
Assets
Cash
Accounts receivable
Inventory
Land
Buildings & equipment
Less: Accumulated depreciation
Investment in Sword Co.
Goodwill
Total Assets	$0	$0	$0	$0	$0
Liabilities & Equity
Accounts payable
Mortgages payable
Common stock
Retained earnings
Total Liabilities & Equity	$0	$0	$0	$0	$0