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Penn Corporation purchased 80 percent ownership of State Company on January 1, 20X2, at underlying book...

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. a. Prepare the consolidation entries needed to complete a worksheet for 20X4.

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