Prince Corporation holds 75 percent of the common stock of Sword Distributors Inc., purchased on December 31, 20X1, for $2,160,000. 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 $540,000. The fair value of the noncontrolling interest at acquisition was $720,000. The differential at acquisition was attributable to the following items: Inventory (sold in 20x2) Land Goodwill Total Differential $ 42,500 59,500 68,000 $170,000 During 20X2, Prince sold a plot of land that it had purchased several years before to Sword at a gain of $23,800; 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 $93,000 per year for these services. At December 31, 20X8, Sword owed Prince $23,250 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: Sword Distributors Inc. Debit Credit $ 47,000 99,400 233,900 Item Cash Current Receivables Inventory Investment in Sword Distributors Land Buildings & Equipment Cost of Goods Sold Depreciation & Amortization Other Expenses Dividends Declared Accumulated Depreciation Current Payables Bonds Payable Common Stock Additional Paid-in Capital Retained Earnings, January 1 Sales Other Income or Loss Income from Sword Distributors Total Prince Corporation Debit Credit $ 59,700 111,800 291,000 2,816,825 402,000 2,480,000 2,188,000 187,000 1,373,000 46,000 $1,100,000 96,200 877,000 92,000 1,259,000 1,462,800 4,827,325 94,000 147,000 $9,955,325 $9,955,325 1,219,000 3,150,000 5e8,000 78,000 218,000 16,000 $ 404,000 532,300 189,000 910,000 1,260,000 1,310,000 997,000 33,000 $5,602,300 $5,602,300 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. Required: a. Compute the amount of the differential as of January 1, 20X8. b. Verify the balance in Prince's Investment in Sword Distributors account as of December 31, 20X8. Balance in Investment in Sword Account 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.) View transaction let Consolidation Worksheet Entries
