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P 5-6 Workpapers (noncontrolling interest, downstream sales, year after acquisition) Pay Corporation acquired a 75 percent interest in Sue Corporation for $1,200,000 on January 1, 2011, when Sue's equity consisted of $600,000 capital stock and $200,000 retained earnings. The fair values of Sue's assets and liabilities were equal to book values on this date, and goodwill is not amortized. Pay uses the equity method of accounting for Sue. During 2011, Pay sold inventory items to Sue for $320,000, and at December 31, 2011, Sue's inventory included items on which there were $40,000 unrealized profits. During 2012, Pay sold inventory items to Sue for $520,000, and at December 31, 2012, Sue's inventory included items on which there were $80,000 unrealized profits. On December 31, 2012, Sue owed Pay $60,000 on account for merchandise purchases. The

P 5-6 Workpapers (noncontrolling interest, downstream sales, year after acquisition) Pay Corporation acquired a 75 percent interest in Sue Corporation for $1,200,000 on January 1, 2011, when Sue's equity consisted of $600,000 capital stock and $200,000 retained earnings. The fair values of Sue's assets and liabilities were equal to book values on this date, and goodwill is not amortized. Pay uses the equity method of accounting for Sue. During 2011, Pay sold inventory items to Sue for $320,000, and at December 31, 2011, Sue's inventory included items on which there were $40,000 unrealized profits. During 2012, Pay sold inventory items to Sue for $520,000, and at December 31, 2012, Sue's inventory included items on which there were $80,000 unrealized profits. On December 31, 2012, Sue owed Pay $60,000 on account for merchandise purchases. The

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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P 5-6 Workpapers (noncontrolling interest, downstream sales, year after acquisition) Pay Corporation acquired a 75 percent interest in Sue Corporation for $1,200,000 on January 1, 2011, when Sue's equity consisted of $600,000 capital stock and $200,000 retained earnings. The fair values of Sue's assets and liabilities were equal to book values on this date, and goodwill is not amortized. Pay uses the equity method of accounting for Sue. During 2011, Pay sold inventory items to Sue for $320,000, and at December 31, 2011, Sue's inventory included items on which there were $40,000 unrealized profits. During 2012, Pay sold inventory items to Sue for $520,000, and at December 31, 2012, Sue's inventory included items on which there were $80,000 unrealized profits. On December 31, 2012, Sue owed Pay $60,000 on account for merchandise purchases. The financial statements of Pay and Sue Corporations at and for the year ended December 31, 2012, are summarized as follows (in thousands): Pay Sue Combined Income and Retained Earnings Statements for the Year Ended December 31, 2012 Sales $ 2,400 $ 1,600 Income from Sue Cost of sales 410 (1,080) (580) (840) (160) Operating expenses Net income 1,150 600 360 Beginning retained earnings Deduct: Dividends 730 (600) (200) Retained earnings December 31, 2012 $ 1,280 $ 760 Pay Sue Balance Sheet at December 31, 2012 Cash Accounts receivable $ 340 $ 120 660 400 Dividends receivable 60 Inventories 240 320 Land Buildings-net Equipment-net Investment in Sue 320 200 920 400 800 560 1,540 $ 4,880 $ 900 Total assets $2,000 $ 400 Accounts payable Dividends payable 280 80 Other liabilities 620 160 Common stock, $10 par Retained earnings Total equities 1,800 1,280 600 760 $ 4,880 $2,000 REQUIRED: Prepare consolidation workpapers for Pay Corporation and Subsidiary for the year ended December 31, 2012.
Transcribed Image Text:P 5-6 Workpapers (noncontrolling interest, downstream sales, year after acquisition) Pay Corporation acquired a 75 percent interest in Sue Corporation for $1,200,000 on January 1, 2011, when Sue's equity consisted of $600,000 capital stock and $200,000 retained earnings. The fair values of Sue's assets and liabilities were equal to book values on this date, and goodwill is not amortized. Pay uses the equity method of accounting for Sue. During 2011, Pay sold inventory items to Sue for $320,000, and at December 31, 2011, Sue's inventory included items on which there were $40,000 unrealized profits. During 2012, Pay sold inventory items to Sue for $520,000, and at December 31, 2012, Sue's inventory included items on which there were $80,000 unrealized profits. On December 31, 2012, Sue owed Pay $60,000 on account for merchandise purchases. The financial statements of Pay and Sue Corporations at and for the year ended December 31, 2012, are summarized as follows (in thousands): Pay Sue Combined Income and Retained Earnings Statements for the Year Ended December 31, 2012 Sales $ 2,400 $ 1,600 Income from Sue Cost of sales 410 (1,080) (580) (840) (160) Operating expenses Net income 1,150 600 360 Beginning retained earnings Deduct: Dividends 730 (600) (200) Retained earnings December 31, 2012 $ 1,280 $ 760 Pay Sue Balance Sheet at December 31, 2012 Cash Accounts receivable $ 340 $ 120 660 400 Dividends receivable 60 Inventories 240 320 Land Buildings-net Equipment-net Investment in Sue 320 200 920 400 800 560 1,540 $ 4,880 $ 900 Total assets $2,000 $ 400 Accounts payable Dividends payable 280 80 Other liabilities 620 160 Common stock, $10 par Retained earnings Total equities 1,800 1,280 600 760 $ 4,880 $2,000 REQUIRED: Prepare consolidation workpapers for Pay Corporation and Subsidiary for the year ended December 31, 2012.
Р5-6 PAY CORPORATION AND SUBSIDIARY CONSOLIDATION WORKSHEET FOR THE YEAR ENDED DECEMBER 31, 2012 75% | Adjustments & Elimination Consolidatec (in thousands) Рay Sue Debits Credits Statements INCOME STATEMENT Sales 2,400.0 1,600.0 4,000.0 Income from Sue 410.0 | 410.0 Cost of sales (1,080.0) || (840.0) | (1,920.0) || Operating expenses (580.0) || (160.0) || (740.0) 1,750.0 Consolidated NI 0.0 Noncontrolling int. share. | Controlling share 1,150.0 600.0 1,750.0 RETAINED EARNINGS Retained earn-Pay 730.0 730.0 Retained earn-Sue 360.0 | 360.0 Controlling share 1,150.0 600.0 1,750.0 Dividends (600.0) | (200.0) | (800.0) Retained earn 12/31 1,280.0 760.0 2,040.0 BALANCE SHEET Cash 340.0 120.0 460.0 Accounts receivable 660.0 400.0 | 1,060.0 Dividends receivable 60.0 60.0 Inventories 240.0 | 320.0 | 560.0 Land 320.0 200.0 520.0 920.0 | 400.0 | Buildings-net Equipment-net 1,320.0 560.0 1,360.0 | 1,540.0 | 800.0 Investment in Sue 1,540.0 | Goodwill 0.0 Total assets 4,880.0 2,000.0 6,880.0 Accounts payable Dividends payable 900.0 400.0 1,300.0 280.0 80.0 360.0 Other liabilities 620.0 160.0 | 780.0 Common stock - $10 par | Retained earnings Total equities 600.0 | 1,800.0 | 1,280.0 2,400.0 760.0 2,040.0 | 4,880.0 2,000.0 Noncontrolling interest 0.0 0.0 0.0 6,880.0
Transcribed Image Text:Р5-6 PAY CORPORATION AND SUBSIDIARY CONSOLIDATION WORKSHEET FOR THE YEAR ENDED DECEMBER 31, 2012 75% | Adjustments & Elimination Consolidatec (in thousands) Рay Sue Debits Credits Statements INCOME STATEMENT Sales 2,400.0 1,600.0 4,000.0 Income from Sue 410.0 | 410.0 Cost of sales (1,080.0) || (840.0) | (1,920.0) || Operating expenses (580.0) || (160.0) || (740.0) 1,750.0 Consolidated NI 0.0 Noncontrolling int. share. | Controlling share 1,150.0 600.0 1,750.0 RETAINED EARNINGS Retained earn-Pay 730.0 730.0 Retained earn-Sue 360.0 | 360.0 Controlling share 1,150.0 600.0 1,750.0 Dividends (600.0) | (200.0) | (800.0) Retained earn 12/31 1,280.0 760.0 2,040.0 BALANCE SHEET Cash 340.0 120.0 460.0 Accounts receivable 660.0 400.0 | 1,060.0 Dividends receivable 60.0 60.0 Inventories 240.0 | 320.0 | 560.0 Land 320.0 200.0 520.0 920.0 | 400.0 | Buildings-net Equipment-net 1,320.0 560.0 1,360.0 | 1,540.0 | 800.0 Investment in Sue 1,540.0 | Goodwill 0.0 Total assets 4,880.0 2,000.0 6,880.0 Accounts payable Dividends payable 900.0 400.0 1,300.0 280.0 80.0 360.0 Other liabilities 620.0 160.0 | 780.0 Common stock - $10 par | Retained earnings Total equities 600.0 | 1,800.0 | 1,280.0 2,400.0 760.0 2,040.0 | 4,880.0 2,000.0 Noncontrolling interest 0.0 0.0 0.0 6,880.0
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