QUESTION Pink Company acquired 80 percent of Scarlet Company's outstanding common stock for $52,000 on January 1, 2019, equals to the book value of Scarlet's net assets. Adjusted trial balance data for Pink and Scarlet as gf December 31, 2018, are as follows (all amounts are in dollars) Pink Company Scarlet Company DR CR DA Cash $15,000 $10,500 Accounts Receivable 19,860 7,500 Inventory 22,000 7,600 Investment in Scarlet 62,640 Land 22,000 27,700 Buildings and equipment 87,500 58.000 Cost of Goods Sold 32,500 38,200 Depreciation Expense 6,700 2.800 Selling and Administrative Expense 25,600 17.500 Dividends Declared 8,200 3,200 Accumulated Depreciation $46,500 $14.500 Accounts Payable 29,300 8.500 Bonds Payable 20,000 10,000 Common Stock 85,000 40.000 Retained Earnings 28,000 25,000 Sales 80,000 75,000 Income from Scarlet 13,200 $302,000 $302.000 5173,000 5173.000 Total a) Prepare the journal entries on Pink's books for the acquisition of Scarlet on January 1, 2019 and entries related to the investment in Scarlet Company during 2019 (15 points) b) Prepare Book Value calculation table (10 points) c) Prepare basic consolidation entry (35 points). d) Prepare accumulated depreciation consolidation entry (10 points). e) Prepare a consolidation worksheet for 2019 in good form (30 points) SOLUTION Equity method journal entries related to the investment ACCOUNT TITLE Debit Credit Book Value Calculations NCI (20%) Parent's Investment (80% Common Stock Retained Earnings Basic Consolidation entry ACCOUNT TITLE Debit Credit Accumulated Depreciation Consolidation Entry ACCOUNT TITLE Debit Credit Consolidation worksheet Income Statement Elimination Entries Pink Scarlet Consolidated DM CH Sales Less:COGS Less: Depreciation Expense Less: Other Expenses Income from Scarlet Consolidated Net Income NC in Net income of Scarlet Controlling interest in Net Income Statement of Retained Earnings Beginning Balance Net Income Less: Dividends Declared Ending Balance Balance Sheet Assets: Cash Accounts Receivable Inventory Investment in Scarlet Land Buldings & Equipment Less: Accumulated Depreciation Total Assets Llawnies and Equity Accounts Payable Bonds Payable Common Stock Retained Earnings NCI In Net assets of Scarlet Total Liablites & Equity