Problem 3 3(LO 4)Sophisticated equity method adjustments, consolidated worksheet (This is the same as Problem 3 2, except that the sophisticated equity method is used ) On January 1, 2015, Paro Company purchases 80 of the common stock of Solar Company for $320,000 On this date, Solar has common stock, other paid in capital in excess of par, and retained earnings of $10,000, $60,000, and $115,000, respectively Net income and dividends for two years for Solar Company are as follows 2015 2016 Net income $40,000 $10,000 Dividends 5,000 10,000 On January 1, 2015, the only undervalued tangible assets of Solar are inventory and the building Inventory, for which FIFO is used, is worth $10,000 more than cost The inventory is sold 50 in 2015 and 50 in 2016 The building, which is worth $150,000 more than book value, has a remaining life of 10 years, and straight line depreciation is used The remaining excess of cost over book value is attributable to goodwill The trial balances for Paro and Solar are as follows P S Inventory 100,000 60,000 Other Current Assets 240,000 80,000 Invest in S PLUG PLUG Land 250,000 100,000 Buildings and Equipment 400,000 160,000 Accumulated Depreciation 100,000 40,000 Goodwill Other Intangiable Assets 50,000 Current Liabilities 80,000 10,000 Bonds payable 130,000 Other Long Term Liabilities 150,000 Common Stock S 10,000 Other PIC S 60,000 Retained Earnings S 150,000 NCI Common Stock P 300,000 Other PIC excess of of par P 450,000 Retained Earnings P 314,000 Sales 200,000 80,000 Cost of Goods Sold 140,000 60,000 Operating Expense 60,000 10,000 Subsiderary Income (Loss) 56,000 Dividends Declared S 10,000 Dividends Declared P 30,000 1 Prepare all consolidation entries in General Journal form as of 12 31 16 2 Prepare a consolidation worksheet at 12 31 16 Also can you explain how inventory is allocated the second year I dont know if i should label it as an expense or is accumulated how it affects the worksheet and elimination entries is my problem

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Problem 3-3(LO 4)Sophisticated equity method adjustments, consolidated worksheet.(This is the same as Problem 3-2, except that the sophisticated equity method is used.) On January 1,

Problem 3-3(LO 4)Sophisticated equity method adjustments, consolidated worksheet.(This is the same as Problem 3-2, except that the sophisticated equity method is used.) On January 1, 2015, Paro Company purchases 80% of the common stock of Solar Company for $320,000. On this date, Solar has common stock, other paid-in capital in excess of par, and retained earnings of $10,000, $60,000, and $115,000, respectively. Net income and dividends for two years for Solar Company are as follows:

_______________________________2015______2016

Net income . . . . . . . . . . . . . . . . . . . . . .$40,000. $10,000

Dividends. . . . . . . . . . . . . . . . . . . . . . . .5,000. 10,000

On January 1, 2015, the only undervalued tangible assets of Solar are inventory and the building. Inventory, for which FIFO is used, is worth $10,000 more than cost. The inventory is sold 50% in 2015 and 50% in 2016. The building, which is worth $150,000 more than book value, has a remaining life of 10 years, and straight-line depreciation is used. The remaining excess of cost over book value is attributable to goodwill.The trial balances for Paro and Solar are as follows:

	P	S
Inventory	100,000	60,000
Other Current Assets	240,000	80,000
Invest in S	?
PLUG
PLUG
Land	250,000	100,000
Buildings and Equipment	400,000	160,000
Accumulated Depreciation	-100,000	-40,000
Goodwill
Other Intangiable Assets	50,000
Current Liabilities	-80,000	-10,000
Bonds payable		-130,000
Other Long-Term Liabilities	-150,000
Common Stock S		-10,000
Other PIC - S		-60,000
Retained Earnings - S		-150,000
NCI


Common Stock - P	-300,000
Other PIC excess of of par - P	-450,000
Retained Earnings - P	-314,000



Sales	-200,000	-80,000
Cost of Goods Sold	140,000	60,000
Operating Expense	60,000	10,000
Subsiderary Income (Loss)	-56,000
Dividends Declared - S		10,000
Dividends Declared - P	30,000

1. Prepare all consolidation entries in General Journal form as of 12/31/16.

2. Prepare a consolidation worksheet at 12/31/16.

Also can you explain how inventory is allocated the second year. I dont know if i should label it as an expense or is accumulated? how it affects the worksheet and elimination entries is my problem.