The partial trial balances of P Co. and S Co. at December 31, Year 10, were as follows:

P Co. S Co.

Dr Cr. Dr Cr.

Investment in S. Co.153,000     

Common shares  157,000   116,000

Retained earnings, beginning of year  127,000   59,000

Additional Information

The investment in the shares of S Co. (a 90% interest) was acquired January 2, Year 6, for $153,000. At that time, the shareholders’ equity of S Co. was common shares of $116,000 and retained earnings of $27,000 and the common shares for P Co. of $157,000.

Net incomes of the two companies for the year were as follows:

P Co.$67,000

S Co.55,000

During Year 10, sales of P Co. to S Co. were $17,000, and sales of S Co. to P Co. were $57,000. Rates of gross profit on intercompany sales in Years 9 and 10 were 40% of sales.

On December 31, Year 9, the inventory of P Co. included $14,000 of merchandise purchased from S Co., and the inventory of S Co. included $10,000 of merchandise purchased from P Co. On December 31, Year 10, the inventory of P Co. included $27,000 of merchandise purchased from S Co., and the inventory of S Co. included $12,000 of merchandise purchased from P Co.

During the year ended December 31, Year 10, P Co. paid dividends of $19,000 and S Co. paid dividends of $17,000.

At the time that P Co. purchased the shares of S Co., the acquisition differential was allocated to patents of S Co. These patents are being amortized for consolidation purposes over a period of five years.

In Year 8, land that originally cost $47,000 was sold by S Co. to P Co. for $57,700. The land is still owned by P Co.

Assume a corporate tax rate of 40%.

Required:

Prepare a consolidated statement of changes in equity for the year ended December 31, Year 10.