Problem 6-29 (Algo) Intercompany Transfer of Inventory LO 6-3, 6-4

Pop Corporation acquired 70 percent of Soda Company's voting common shares on January 1, 20X2, for $114,800. At that date, the noncontrolling interest had a fair value of $49,200 and Soda reported $70,000 of common stock outstanding and retained earnings of $25,000. The differential is assigned to buildings and equipment, which had a fair value $22,000 higher than book value and a remaining 10-year life, and to patents, which had a fair value $47,000 higher than book value and a remaining life of five years at the date of the business combination. Trial balances for the companies as of December 31, 20X3, are as follows:

Item	Pop Corporation	Soda Company
Debit	Credit	Debit	Credit
Cash and Accounts Receivable	$ 17,400		$ 23,600
Inventory	167,000		37,000
Land	82,000		42,000
Buildings and Equipment	360,000		262,000
Investment in Soda Company	117,100
Cost of Goods Sold	188,000		81,800
Depreciation Expense	25,000		20,000
Interest Expense	18,000		7,200
Dividends Declared	32,000		17,000
Accumulated Depreciation		$ 142,000		$ 90,000
Accounts Payable		94,400		37,000
Bonds Payable		234,180		90,000
Bond Premium				1,600
Common Stock		122,000		70,000
Retained Earnings		129,900		62,000
Sales		262,000		140,000
Other Income		11,600
Income from Soda Company		10,420
	$ 1,006,500	$ 1,006,500	$ 490,600	$ 490,600

On December 31, 20X2, Soda purchased inventory for $30,000 and sold it to Pop for $50,000. Pop resold $29,000 of the inventory (i.e., $29,000 of the $50,000 acquired from Soda) during 20X3 and had the remaining balance in inventory at December 31, 20X3.

During 20X3, Soda sold inventory purchased for $54,000 to Pop for $90,000, and Pop resold all but $26,000 of its purchase. On March 10, 20X3, Pop sold inventory purchased for $16,000 to Soda for $32,000. Soda sold all but $8,000 of the inventory prior to December 31, 20X3. Assume Pop uses the fully adjusted equity method, that both companies use straight-line depreciation, and that no property, plant, and equipment has been purchased since the acquisition.

Required:

Prepare all consolidation entries needed to prepare a full set of consolidated financial statements at December 31, 20X3, for Pop and Soda.

Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.

Prepare a three-part consolidation worksheet for 20X3.

Note: 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.