Punk Corporation purchased 90 percent of Soul Companys voting common shares on January 1, 20X2, at underlying book value. At that date, the fair value of the noncontrolling interest was equal to 10 percent of the book value of Soul Company. Punk also purchased $88,000 of 6 percent, five-year bonds directly from Soul on January 1, 20X2, for $92,000. The bonds pay interest annually on December 31. The trial balances of the companies as of December 31, 20X4, are as follows:
| | Punk Corporation | | Soul Company |
| Item | Debit | | Credit | | Debit | | Credit |
| Cash & Receivables | | $ | 31,000 | | | | | | | | | | | $ | 45,600 | | | | | | | | |
| Inventory | | | 174,000 | | | | | | | | | | | | 93,000 | | | | | | | | |
| Buildings & Equipment | | | 414,000 | | | | | | | | | | | | 244,000 | | | | | | | | |
| Investment in Soul Company Stock | | | 116,748 | | | | | | | | | | | | | | | | | | | | |
| Investment in Soul Company Bonds | | | 89,600 | | | | | | | | | | | | | | | | | | | | |
| Cost of Goods Sold | | | 76,000 | | | | | | | | | | | | 69,800 | | | | | | | | |
| Depreciation Expense | | | 17,000 | | | | | | | | | | | | 12,000 | | | | | | | | |
| Interest Expense | | | 15,280 | | | | | | | | | | | | 4,480 | | | | | | | | |
| Dividends Declared | | | 27,000 | | | | | | | | | | | | 17,000 | | | | | | | | |
| Accumulated Depreciation | | | | | | | | $ | 120,000 | | | | | | | | | | | $ | 60,000 | | |
| Current Payables | | | | | | | | | 110,900 | | | | | | | | | | | | 103,280 | | |
| Bonds Payable | | | | | | | | | 188,000 | | | | | | | | | | | | 88,000 | | |
| Bond Premium | | | | | | | | | | | | | | | | | | | | | 1,600 | | |
| Common Stock | | | | | | | | | 101,000 | | | | | | | | | | | | 61,000 | | |
| Retained Earnings | | | | | | | | | 231,000 | | | | | | | | | | | | 31,000 | | |
| Sales | | | | | | | | | 156,000 | | | | | | | | | | | | 141,000 | | |
| Interest Income | | | | | | | | | 4,480 | | | | | | | | | | | | | | |
| Income from Soul Company Stock | | | | | | | | | 49,248 | | | | | | | | | | | | | | |
| Total | | $ | 960,628 | | | | | $ | 960,628 | | | | | $ | 485,880 | | | | | $ | 485,880 | | |
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Required: a. Prepare the journal entry or entries for 20X4 on Punks books related to its investment in Soul Company stock. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
b. Prepare the journal entry or entries for 20X4 on Punks books related to its investment in Soul Company bonds. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
c. Prepare the journal entry or entries for 20X4 on Souls books related to its bonds payable. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
d. Prepare the consolidation entries needed to complete a consolidated worksheet for 20X4. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
e. Prepare a three-part consolidated worksheet for 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.)
No Event General Journal Debit Credit A 1 Cash Investment in Soul Company stock Investment in Soul Company stock 2 49,248 Income from Soul Company stock 49,248 b. Prepare the journal entry or entries for 20x4 on Punk's books related to its investment in Soul Company bonds. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Answer is not complete. No Event General Journal Debit Credit A Cash 1 Interest income Investment in Soul Company bonds 800 Interest expense A 1 Bond premium Cash d. Prepare the consolidation entries needed to complete a consolidated worksheet for 20x4. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Answer is not complete. Credit No Event Accounts Debit Common stock A 1 61,000 Retained earnings 31,000 Income from Soul Company stock NCI in NI of Soul Company 49,248 Dividends declared 17,000 Investment in Soul Company stock NCI in NA of Soul Company Bonds payable 2 88,000 Bond premium Interest income Investment in Soul Company bonds Interest expense Sales 156,000 141,000 297,000 Interest Income 4,480 4,480 Less: COGS (76,000) (69,800) (145,800) Less: Depreciation Expense (17,000) (12,000) (29,000) Less: Interest Expenses (15,280) (4,480) (19,760) Income from Soul Company Stock 49,248 49,248 101,448 Consolidated Net Income 54,720 0 156,168 NCI in Net Income Controlling Interest in Net Income Statement of Retained Earnings 101,448 54,720 0 156,168 Beginning Balance 231,000 31,000 262,000 Net Income 101,448 54,720 156,168 (17,000) Less: Dividends Declared (27,000) (44,000) 305,448 68,720 0 0 374,168 Ending Balance Balance Sheet Assets Cash and Accounts Receivable 31,000 45,600 76,600 174,000 Inventory 93,000 267,000 Buildings& Equipment 414,000 244,000 658,000 Less: Accumulated Depreciation Investment in Soul Company Bonds Investment in Soul Company Stock (120,000) (60,000) (180,000) 89,600 89,600 116,748 116,748 705,348 322,600 0 1,027,948 Total Assets Liabilities & Equity Current Payable 110,900 103,280 214,180 Bonds Payable 188,000 88,000 276,000 Bond Premium 1,600 1,600 Common Stock 101,000 61,000 162,000 Retained Earnings 305,448 68,720 0 NCI in NA of Soul Company 705,348 322,600 0 0 653.780 Total Liabilities & Eauitv No Event General Journal Debit Credit A 1 Cash Investment in Soul Company stock Investment in Soul Company stock 2 49,248 Income from Soul Company stock 49,248 b. Prepare the journal entry or entries for 20x4 on Punk's books related to its investment in Soul Company bonds. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Answer is not complete. No Event General Journal Debit Credit A Cash 1 Interest income Investment in Soul Company bonds 800 Interest expense A 1 Bond premium Cash d. Prepare the consolidation entries needed to complete a consolidated worksheet for 20x4. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Answer is not complete. Credit No Event Accounts Debit Common stock A 1 61,000 Retained earnings 31,000 Income from Soul Company stock NCI in NI of Soul Company 49,248 Dividends declared 17,000 Investment in Soul Company stock NCI in NA of Soul Company Bonds payable 2 88,000 Bond premium Interest income Investment in Soul Company bonds Interest expense Sales 156,000 141,000 297,000 Interest Income 4,480 4,480 Less: COGS (76,000) (69,800) (145,800) Less: Depreciation Expense (17,000) (12,000) (29,000) Less: Interest Expenses (15,280) (4,480) (19,760) Income from Soul Company Stock 49,248 49,248 101,448 Consolidated Net Income 54,720 0 156,168 NCI in Net Income Controlling Interest in Net Income Statement of Retained Earnings 101,448 54,720 0 156,168 Beginning Balance 231,000 31,000 262,000 Net Income 101,448 54,720 156,168 (17,000) Less: Dividends Declared (27,000) (44,000) 305,448 68,720 0 0 374,168 Ending Balance Balance Sheet Assets Cash and Accounts Receivable 31,000 45,600 76,600 174,000 Inventory 93,000 267,000 Buildings& Equipment 414,000 244,000 658,000 Less: Accumulated Depreciation Investment in Soul Company Bonds Investment in Soul Company Stock (120,000) (60,000) (180,000) 89,600 89,600 116,748 116,748 705,348 322,600 0 1,027,948 Total Assets Liabilities & Equity Current Payable 110,900 103,280 214,180 Bonds Payable 188,000 88,000 276,000 Bond Premium 1,600 1,600 Common Stock 101,000 61,000 162,000 Retained Earnings 305,448 68,720 0 NCI in NA of Soul Company 705,348 322,600 0 0 653.780 Total Liabilities & Eauitv
