Problem I. On January 1, 2019, P Corp acquired 80% of the outstanding common stock of S Corp for $820,000 cash. On that date, S Companys stockholders equity consisted of common stock, $150,000; other contributed capital, $200,000; and retained earnings, $350,000. P Corp paid more than the book value of net assets acquired because the recorded cost of S Corps equipment (5 year remaining useful life) was $40,000 less than its fair value; the remainder was allocated to goodwill. There were acquisition related costs of $40,000 at the date of acquisition.

During 2019 S Corp earned $240,000 and declared and paid a $80,000 dividend. P Corp used the equity method to record its investment in S Corp. In addition, P Corp sold (transferred) $100,000 of goods to S Corp on account. The goods cost P Corp $60,000. At the end of 2019, approximately $20,000 of the transfer remains unsold.

During 2020 S Corp earned $280,000 and declared and paid a $90,000 dividend. The unsold goods from 2019 were all sold to 3^rd parties. In addition, P Corp. sold (transferred) $120,000 of goods to S Corp on account. The goods cost P Corp $90,000. At the end of 2020, approximately $30,000 of the transfer remains unsold.

1-. Prepare the journal entries on P Corps books to record S Corps income and dividends during 2020, as well as any other necessary journal entries during the year.

2-Prepare the worksheet entries at December 31, 2020