Question

Penn Corporation purchased 80 percent ownership of State Company on January 1, 20X2, at underlying book value. At that date, the fair value of the noncontrolling interest was equal to 20 percent of the book value of State. On January 1, 20X4, Penn sold 2,000 shares of State's stock for $65,000 to Nonaffiliated Company and recorded a $12,000 increase in additional paid-in capital. Trial balances for the companies on December 31, 20X4, contain the following data:

	Penn Corporation							State Company
	Debit			Credit				Debit			Credit
Cash	$	32,000						$	37,000
Accounts Receivable		75,000							55,000
Inventory		127,000							107,000
Buildings & Equipment		700,000							250,000
Investment in State Company		171,600
Cost of Goods Sold		206,000							96,000
Depreciation Expense		21,000							16,000
Other Expenses		30,000							34,000
Dividends Declared		20,000							15,000
Accumulated Depreciation				$	166,000						$	91,000
Accounts Payable					245,200							51,000
Bonds Payable					155,000							21,000
Common Stock ($10 par)					200,000							100,000
Additional Paid-In Capital					69,000							27,000
Retained Earnings					255,000							140,000
Sales					272,000							180,000
Income from State					20,400
Total	$	1,382,600		$	1,382,600			$	610,000		$	610,000

State's net income was earned evenly throughout the year. Both companies declared and paid their dividends on December 31, 20X4. Penn uses the equity method in accounting for its investment in State. b. Prepare a consolidation worksheet for 20X4. I have gotten it started.

PENN CORPORATION AND SUBSIDIARY Consolidated Financial Statement Worksheet December 31, 20X4 Consolidation Entries Penn Corp. State Co. DR CR Consolidated Income Statement Sales 272,000 180,000 452,000 Less: COGS (206,000) (96,000) (302,000) Less: Depreciation Expense (21,000) (16,000) (37,000) Less: Other Expenses (30,000) (34,000) (64,000) Income from State Co. 20,400 20,400 0 Consolidated Net Income 35,400 34,000 20,400 0 49,000 NCI in Net Income 13,600 (13,600) Controlling Interest in NI 35,400 34,000 34,000 0 35,400 Statement of Retained Earnings Beginning Balance 255,000 140,000 395,000 Net Income 35,400 34,000 34,000 35,400 Less: Dividends Declared 20,000 15,000 35,000 Ending Balance 310,400 189,000 34,000 0 465,400 Balance Sheet Cash 32,000 37,000 69,000 Accounts Receivable 75,000 55,000 130,000 Inventory 127,000 107,000 234,000 Buildings and Equipment 700,000 250,000 950,000 Less: Accumulated Depreciation (166,000) (91,000) (257,000) Investment in State Co. 171,600 171,600 0 Total Assets 939,600 358,000 0 171,600 1,126,000 Accounts Payable 245,200 51,000 296,200 Bonds Payable 155,000 21,000 176,000 Common Stock 200,000 100,000 300,000 Additional Paid-In Capital 69,000 27,000 96,000 Retained Earnings 310,400 189,000 34,000 0 NCI in NA of State Co. Total Liabilities & Equity 979,600 388,000 34,000 0 868,200

Answer 1