Prince Corporation holds 75 percent of the common stock of Sword Distributors Inc., purchased on December 31, 20X1, for $2,100,000. At the date of acquisition, Sword reported common stock with a par value of $910,000, additional paid-in capital of $1,260,000, and retained earnings of $550,000. The fair value of the noncontrolling interest at acquisition was $700,000. The differential at acquisition was attributable to the following items:

Inventory (sold in 20X2)$20,000Land28,000Goodwill32,000Total Differential$80,000

During 20X2, Prince sold a plot of land that it had purchased several years before to Sword at a gain of $11,200; Sword continues to hold the land. In 20X6, Prince and Sword entered into a five-year contract under which Prince provides management consulting services to Sword on a continuing basis; Sword pays Prince a fixed fee of $95,000 per year for these services. At December 31, 20X8, Sword owed Prince $23,750 as the final 20X8 quarterly payment under the contract.

On January 2, 20X8, Prince paid $260,000 to Sword to purchase equipment that Sword was then carrying at $300,000. Sword had purchased that equipment on December 27, 20X2, for $450,000. The equipment is expected to have a total 15-year life and no salvage value. The amount of the differential assigned to goodwill has not been impaired.

At December 31, 20X8, trial balances for Prince and Sword appeared as follows:

Prince CorporationSword Distributors Inc.ItemDebitCreditDebitCreditCash$53,700$41,000Current Receivables105,80093,400Inventory290,000223,900Investment in Sword Distributors2,771,300Land415,0001,206,000Buildings & Equipment2,420,0003,170,000Cost of Goods Sold2,183,000513,000Depreciation & Amortization201,00085,000Other Expenses1,374,000226,000Dividends Declared41,00011,000Accumulated Depreciation$1,100,000$402,000Current Payables90,200522,300Bonds Payable941,000196,000Common Stock89,000910,000Additional Paid-in Capital1,255,0001,260,000Retained Earnings, January 11,461,8001,310,000Sales4,683,050995,000Other Income or Loss99,00026,000Income from Sword Distributors135,750Total$9,854,800$9,854,800$5,595,300$5,595,300

As of December 31, 20X8, Sword had declared but not yet paid its fourth-quarter dividend of $5,000. Both companies use straight-line depreciation and amortization. Prince uses the fully adjusted equity method to account for its investment in Sword.

A).a. Compute the amount of the differential as of January 1, 20X8.

Remaining Differitnal

b. Verify the balance in Prince's Investment in Sword Distributors account as of December 31, 20X8.

Balance investment in Sword Account

C)c. Present all consolidation entries that would appear in a three-part consolidation worksheet as of December 31, 20X8.(If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to nearest whole dollar amount.)

A).Record the basic consolidation entry.

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

C). Record the entry to eliminate the intercompany service revenue.

D).Record the entry to eliminate the intercompany receivables/payables.

E). Record the entry to eliminate the intercompany dividend owed.

F).Record the entry to eliminate the gain on the sale of land.

G). Record the entry to eliminate the gain on equipment and to correct the asset's basis.

H).Record the entry to adjust Accumulated Depreciation.

d. Prepare and complete a three-part worksheet for the preparation of consolidated financial statements for 20X8.(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 Subsidary

Consoldated Finical Statement worksheet

Dec 31 20X8

Prince Corp Sword Dis. Dr CR Consolidated

Income Statement

Sales

Other income (loss)

Less COGS

Less Depercation & amort Expense

Less other Expense

Income From sword Dist

Consolidated net income

NCI Net income

Controlling interest inc in NI

Statement of Retainined earnings

Beg Balance

Net income

Less Dividends delcared

Ending balance

Balance Sheet

Cash

Current recevibales

Inventory

land

Building & equipment

less acummlated dep

investment in swdr inc

goodwill

Total Assets

Current payables

Bonds payable

common stock

addidtional paid in Captial

retained earnings

Nci in Na of sword dis

Total Liablites and equity