Subsidiary Loss LO 5 The following accounts appeared in the separate financial statements at the end of 2019 for Pressing Inc. and its wholly-owned subsidiary, Stressing Inc. Stressing was acquired in 2014. Pressing Inc. Stressing Inc. Investment in subsidiary 660,000 Dividends receivable 5,000 Dividends payable 20,000 5,000 Common stock 300,000 20,000 Additional paid-in-capital 500,000 380,000 Retained earnings, 12/31/19 500,000 260,000 Dividends declared (75,000) (24,000) Equity in net loss of subsidiary (55,000) Retained earnings at 1/1/19 380,000

Required: 1. How can you determine whether Pressing is using the cost or equity method to account for its investment in Stressing?

2. Compute controlling interest in consolidated income.

3. How much income did Pressing Inc. earn from its own independent operations?

4. Compute consolidated retained earnings at 12/31/19.

5. What are consolidated dividends?

6. Compute retained earnings at 1/1/19 for Stressing Inc.

7. Was there any difference between book value and the value implied by the purchase price at acquisition? Prepare workpaper entries needed at the end of 2019.

8. If Pressing used the cost method instead of the equity method, how would Pressing Incs retained earnings change at the end of 2019? Describe in words.

9. If Pressing uses the cost method instead of the equity method, what workpaper entries would be required at the end of 2019? Describe in words.