Equity method balance in Phillips's Investment in Bearden, Inc., account as of December 31, 2022. Worksheet adjustments for the December 31, 2022, consolidation of Phillips and Bearden.
On January 1, 2021, Phillips Company purchased 100 percent of the outstanding voting stock of Bearden, Inc., for $1,000,000 in cash and other consideration. At the purchase date, Bearden had common stock of $500,000 and
During the next two years, Bearden reporting the following:
| Year | Income | Dividends Declared | Inventory Transfers to Phillips at Transfer Price |
| 2021 | $85,000 | $27,000 | $200,000 |
| 2022 | 90,000 | 29,000 | 220,000 |
Bearden sells inventory to Phillips after a markup based on a gross profit rate. At the end of 2021 and 2022, 30 percent of the current year purchases remain in Phillips's inventory.
Required
Create an Excel spreadsheet that computes the following:
- Equity method balance in Phillips's Investment in Bearden, Inc., account as of December 31, 2022.
- Worksheet adjustments for the December 31, 2022, consolidation of Phillips and Bearden.
Formulate your solution so that Bearden's gross profit rate on sales to Phillips is treated as a variable (this requires the use of formulas in your Excel spreadsheet!).
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