The balance sheets of Forest Company and Garden Company are presented below as at December 31, Year 8. BALANCE SHEETS At December 31, Year 8 Forest $ 13,100 25,100 80,160 215,100 740,100 (625, 800) Garden $ 49,800 87,674 63,000 Cash Receivables Inventories Investment in shares of Garden Plant and equipment Accumulated depreciation Patents Investment in bonds of Forest 461,000 (349,400) 5,500 58,420 5 376,000 $ 54,000 31,000 Current liabilities Dividends payable Bonds payable 6 Common shares Retained earnings $ 447,700 $ 59,169 6,000 94,846 200,000 87.685 $447,700 150,000 141,000 $ 376,000 Additional Information Forest acquired 90% of Garden for $215.100 on July 1 Year 1, and accounts for its investment under the cost method At that time the shareholders equity of Garden amounted to $176,000, the accumulated amortization was $96.000, and the assets of Garden Help Save & Exit Check Additional Information . Forest acquired 90% of Garden for $215,100 on July 1, Year 1, and accounts for its investment under the cost method. At that time, the shareholders' equity of Garden amounted to $176,000, the accumulated amortization was $96,000, and the assets of Garden were undervalued by the following amounts. 36 Inventory Buildings Patents $13,000 $11,000 rensining life, 10 years $20,80 remaining life, 8 years During Year 8. Forest reported net income of $42.000 and declared dividends of $26.000, whereas Garden reported net income of $64,000 and declared dividends of $51,000, During Years 2 to 7 goodwill impairment losses totalled $2,000. An impairment test conducted in Year 8 indicated a further loss of $7,200 Forest sells goods to Garden on a regular basis at a gross profit of 30% During Year 8. these sales totalled $150,100 On January 1 Year B. the inventory of Garden contained goods purchased from Forest amounting to $18, 100, while the December 31, Year & Inventory contained goods purchased from Forest amounting to $22.100 On August 1. Year 6. Garden sold land to Forest at a profit of $18.100 During Year 8. Forest sold one-quarter of the land to an unrelated company Forest's bonds have a par value of $100,000 pay interest annually on December 31 at a stated rate of 6% and mature on December 31 Year 11. Forest incurs an effective interest cost of 89 on these bonds They had a carrying amount of $93,376 on January 1 Year 8. On that date, Garden acquired $60.000 of these bonds on the open market at a cost of $57.968 Garden we earn an effective rate of return of 7 on them. Both companies use the effective interest method to account for their bonds The Year 8 income statements of the two companies show the following with respect to bond interest Interest expense Interest revenue Forest Garden $ 7,470 $ 4,058 Garden owes Forest $22,100 on open account on December 31, Year 8. Assume a 40% corporate tax rate and allocate bond gains (losses) between the two companies. Required: (a) Prepare the following statements 6) Consolidated balance sheet (Amounts to be deducted should be indicated by a minus sign. Do not round intermediate calculations and round your final answers to nearest dollar amount. The balance sheet total may vary due to rounding.) (II) Consolidated retained earnings statement (Input all values as positive numbers. Do not round intermediate calculations and round your final answers to nearest dollar amount. Omit $ sign in your response.) Forest Company Consolidated Retained Earnings Statement Year 8 Retained earnings, Jan 1 Add. Net Income Less Dividends Retained eamings. Dec 31 (b) Prepare the Year 8 journal entries that would be made on the books of Forest of the equity method was used to account for the investment (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations and round your final answers to nearest dollar amount.) View transaction list X 1 To record 90% of adjusted subsidiary income. 2 To record 90% of Garden's dividend of 51,000 3 To record the adjustments to parent's net income. Credit The balance sheets of Forest Company and Garden Company are presented below as at December 31, Year 8. BALANCE SHEETS At December 31, Year 8 Forest $ 13,100 25,100 80,160 215,100 740,100 (625, 800) Garden $ 49,800 87,674 63,000 Cash Receivables Inventories Investment in shares of Garden Plant and equipment Accumulated depreciation Patents Investment in bonds of Forest 461,000 (349,400) 5,500 58,420 5 376,000 $ 54,000 31,000 Current liabilities Dividends payable Bonds payable 6 Common shares Retained earnings $ 447,700 $ 59,169 6,000 94,846 200,000 87.685 $447,700 150,000 141,000 $ 376,000 Additional Information Forest acquired 90% of Garden for $215.100 on July 1 Year 1, and accounts for its investment under the cost method At that time the shareholders equity of Garden amounted to $176,000, the accumulated amortization was $96.000, and the assets of Garden Help Save & Exit Check Additional Information . Forest acquired 90% of Garden for $215,100 on July 1, Year 1, and accounts for its investment under the cost method. At that time, the shareholders' equity of Garden amounted to $176,000, the accumulated amortization was $96,000, and the assets of Garden were undervalued by the following amounts. 36 Inventory Buildings Patents $13,000 $11,000 rensining life, 10 years $20,80 remaining life, 8 years During Year 8. Forest reported net income of $42.000 and declared dividends of $26.000, whereas Garden reported net income of $64,000 and declared dividends of $51,000, During Years 2 to 7 goodwill impairment losses totalled $2,000. An impairment test conducted in Year 8 indicated a further loss of $7,200 Forest sells goods to Garden on a regular basis at a gross profit of 30% During Year 8. these sales totalled $150,100 On January 1 Year B. the inventory of Garden contained goods purchased from Forest amounting to $18, 100, while the December 31, Year & Inventory contained goods purchased from Forest amounting to $22.100 On August 1. Year 6. Garden sold land to Forest at a profit of $18.100 During Year 8. Forest sold one-quarter of the land to an unrelated company Forest's bonds have a par value of $100,000 pay interest annually on December 31 at a stated rate of 6% and mature on December 31 Year 11. Forest incurs an effective interest cost of 89 on these bonds They had a carrying amount of $93,376 on January 1 Year 8. On that date, Garden acquired $60.000 of these bonds on the open market at a cost of $57.968 Garden we earn an effective rate of return of 7 on them. Both companies use the effective interest method to account for their bonds The Year 8 income statements of the two companies show the following with respect to bond interest Interest expense Interest revenue Forest Garden $ 7,470 $ 4,058 Garden owes Forest $22,100 on open account on December 31, Year 8. Assume a 40% corporate tax rate and allocate bond gains (losses) between the two companies. Required: (a) Prepare the following statements 6) Consolidated balance sheet (Amounts to be deducted should be indicated by a minus sign. Do not round intermediate calculations and round your final answers to nearest dollar amount. The balance sheet total may vary due to rounding.) (II) Consolidated retained earnings statement (Input all values as positive numbers. Do not round intermediate calculations and round your final answers to nearest dollar amount. Omit $ sign in your response.) Forest Company Consolidated Retained Earnings Statement Year 8 Retained earnings, Jan 1 Add. Net Income Less Dividends Retained eamings. Dec 31 (b) Prepare the Year 8 journal entries that would be made on the books of Forest of the equity method was used to account for the investment (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations and round your final answers to nearest dollar amount.) View transaction list X 1 To record 90% of adjusted subsidiary income. 2 To record 90% of Garden's dividend of 51,000 3 To record the adjustments to parent's net income. Credit