Question
Proud Corporation acquired 80 percent of Spirited Companys voting stock on January 1, 20X3, at underlying book value. The fair value of the noncontrolling interest
Proud Corporation acquired 80 percent of Spirited Companys voting stock on January 1, 20X3, at underlying book value. The fair value of the noncontrolling interest was equal to 20 percent of the book value of Spirited at that date. Assume that the accumulated depreciation on depreciable assets was $56,000 on the acquisition date. Proud uses the equity method in accounting for its ownership of Spirited. On December 31, 20X4, the trial balances of the two companies are as follows: Proud Corporation Spirited Company Item Debit Credit Debit Credit Current Assets $ 241,000 $ 157,000 Depreciable Assets 502,000 302,000 Investment in Spirited Company 153,920 Depreciation Expense 24,000 14,000 Other Expenses 145,000 87,000 Dividends Declared 59,000 24,600 Accumulated Depreciation $ 194,000 $ 84,000 Current Liabilities 63,000 43,000 Long-Term Debt 120,320 139,600 Common Stock 196,000 100,000 Retained Earnings 280,000 70,000 Sales 234,000 148,000 Income from Spirited Company 37,600 $ 1,124,920 $ 1,124,920 $ 584,600 $ 584,600 Required: a. Prepare all consolidation entries required on December 31, 20X4, to prepare consolidated financial statements. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) b. Prepare a three-part consolidation worksheet as of December 31, 20X4. (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.) Required: a. Prepare all consolidation entries required on December 31, 20X4, to prepare consolidated financial statements. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
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