In: Accounting
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.