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Prince Corporation holds 75 percent of the common stock of Sword Distributors Inc., purchased on December 31, 20x1, for $2,160,000. At the date of acquisition, Sword reported common stock with a par value of $910,000, additional paid-in capital of $1,260,000, and retained earnings of $530,000. The fair value of the noncontrolling interest at acquisition was $720,000. The differential at acquisition was attributable to the following items: Land Inventory (sold in 20x2) Goodwill Total Differential $ 45,000 63,000 72,000 $180,000 During 20x2, Prince sold a plot of land that it had purchased several years before to Sword at a gain of $25,200; Sword continues to hold the land. In 20X6, Prince and Sword entered into a five-year contract under which Prince provides management consulting services to Sword on a continuing basis: Sword pays Prince a fixed fee of $91,000 per year for these services. At December 31, 20x8, Sword owed Prince $22,750 as the final 20X8 quarterly payment under the contract. On January 2, 20x8, Prince paid $260,000 to Sword to purchase equipment that Sword was then carrying at $300,000. Sword had purchased that equipment on December 27, 20x2, for $450,000. The equipment is expected to have a total 15-year life and no salvage value. The amount of the differential assigned to goodwill has not been impaired. At December 31, 20x8, trial balances for Prince and Sword appeared as follows: Prince Corporation Sword Distributors Inc. Item Debit Credit Debit Credit Cash $ 53,700 $ 41,000 Current Receivables 107,800 95, 400 Inventory 303,000 223,900 Investment in Sword Distributors 2,812,050 Land 418,000 1,208,000 Buildings & Equipment 2,520,000 3,120,000 Cost of Goods Sold 2,175,000 510,000 Depreciation & Amortization 195,000 75,000 Other Expenses 1, 372,000 226,000 Dividends Declared 44,000 14,000 Accumulated Depreciation $ 1,100,000 $ 413,000 Current Payables 92,200 465,300 Bonds Payable 831,000 198,000 Common Stock 85,000 910,000 Additional Paid-in Capital 1, 262,000 1,260,000 Retained Earnings, January 1 1,468,800 1,310,000 Sales 4,928,050 988,000 Other Income or Loss 97,000 31,000 Income from Sword Distributors 136,500 Total $10,000, 550 $10,000.550 $5,544,300 $5,544,300 As of December 31, 20x8, Sword had declared but not yet paid its fourth-quarter dividend of $5,000. Both companies use straight-line depreciation and amortization. Prince uses the fully adjusted equity method to account for its investment in Sword. As of December 31, 20x8, Sword had declared but not yet paid its fourth-quarter dividend of $5,000. Both companies use straight-line depreciation and amortization. Prince uses the fully adjusted equity method to account for its investment in Sword. Required: a. Compute the amount of the differential as of January 1, 20X8. Remaining differential 135,000 b. Verify the balance in Prince's Investment in Sword Distributors account as of December 31, 20x8. Balance in Investment in Sword Account $ 2,813,550 c. Present all consolidation entries that would appear in a three-part consolidation worksheet as of December 31, 20X8. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to nearest whole dollar amount.) No Event 1 Credit A > Accounts Common stock Additional paid-in capital Retained earnings Income from Sword Dist. NCI in Nl of Sword Dist. Dividends declared Investment in Sword Dist. NCI in NA of Sword Dist. Debit 910,000 1,260,000 1,310,000 136,500 47,500 14,000 2,737,500 X 912,500 B 2 63,000 72,000 Land Goodwill Investment in Sword Dist. NCI in NA of Sword Dist. 101,250 33,750 3 91,000 Other income Other expenses 91,000 D 4 Current payables Current receivables > 22,750 22,750 E 5 3.750 Current payables Current receivables >> 3,750 F 6 Investment in Sword Dist. 25,200 Land 25,200 G 7 190,000 Equipment Loss on sale Accumulated depreciation OOO 40,000 150,000 H 8 4,000 Depreciation expense Accumulated depreciation 4,000 vons ed Financial Statement worksheet December 31, 20x8 Prince Corp. Sword Dist. Consolidation Entries DR CR Consolidated 91,000 40,000 4,928,050 97,000 (2,175,000) (195,000) (1,372,000) 136,500 1,419,550 988,000 (31,000) (510,000) (75,000) (226,000) 5,916,050 15,000 (2,685,000) (274,000) (1,507.000) 4,000 91,000 0 146,000 131.000 136,500 231,500 47,500 279,000 1.465.050 (47,500) 1,417,550 1,419,550 146,000 131,000 1,310,000 279,000 1,468,800 1,419,550 (44,000) 2,844,350 1,310,000 146,000 (14,000) 1,442,000 131,000 14,000 145,000 1.468,800 1,417,550 (44,000) 2,842,350 1,589,000 Income Statement Sales Other income (loss) Less: COGS Less: Depreciation & amort, expense Less: Other expenses Income from Sword Dist. Consolidated net income NCI in net income Controlling Interest in NI Statement of Retained Earnings Beginning balance Net income Less: Dividends declared Ending Balance Balance Sheet Cash Current receivables Inventory Land Buildings & equipment Less: Accumulated depr. Investment in Sword Dist. Goodwill Total Assets Current payables Bonds payable Common stock Additional Paid-in capital Retained earnings NCI in NA of Sword Dist. Total Liabilities & Equity 26,500 53,700 107,800 303,000 418,000 2,520,000 (1,100,000) 2,812,050 41,000 95,400 223,900 1,208,000 3,120,000 (413,000) 25,200 63,000 190,000 154,000 2,837.250 25,200 72,000 350,200 26,500 3,042,950 94,700 176.700 526,900 1,663,800 5,830,000 (1.667.000) 0 72,000 6,697,100 531,000 1,029,000 85,000 1,262,000 2,842,350 946.250 6,695,600 5,114,550 92,200 831.000 85,000 1,262,000 2,844,350 4,275,300 465,300 198,000 910,000 1,260,000 1,442,000 910,000 1,260,000 1,589,000 145.000 946,250 1,091.250 5,114,550 4,275,300 3,785,500