Show calculations, journal entry and note notations P 5-6Workpapers (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 valuesof Sue's assets and liabilities were equal to book values on this date, and goodwill is not amortized. Payuses the equity method of accounting for Sue.During 2011, Pay sold inventory items to Sue for $320,000, and at December 31, 2011, Sue'sinventory included items on which there were $40,000 unrealized profits. During 2012, Pay soldinventory items to Sue for $520,000, and at December 31, 2012, Sue's inventory included items onwhich there were $80,000 unrealized profits.On December 31, 2012, Sue owed Pay $60,000 on account for merchandise purchases. Thefinancial statements of Pay and Sue Corporations at and for the year ended December 31, 2012, aresummarized as follows (in thousands):PaySueCombined Income and Retained Earnings Statementsfor the Year Ended December 31, 2012Sales$ 2,400$ 1,600Income from SueCost of sales410(1,080)(580)(840)(160)Operating expensesNet income1,150600360Beginning retained earningsDeduct: Dividends730(600)(200)Retained earnings December 31, 2012$ 1,280$ 760PaySueBalance Sheet at December 31, 2012CashAccounts receivable$ 340$ 120660400Dividends receivable60Inventories240320LandBuildings-netEquipment-netInvestment in Sue3202009204008005601,540$ 4,880$ 900Total assets$2,000$ 400Accounts payableDividends payable28080Other liabilities620160Common stock, $10 parRetained earningsTotal equities1,8001,280600760$ 4,880$2,000REQUIRED: Prepare consolidation workpapers for Pay Corporation and Subsidiary for the year endedDecember 31, 2012. Р5-6PAY CORPORATION AND SUBSIDIARYCONSOLIDATION WORKSHEETFOR THE YEAR ENDED DECEMBER 31, 201275%| Adjustments & EliminationConsolidatec(in thousands)РaySueDebitsCreditsStatementsINCOME STATEMENTSales2,400.01,600.04,000.0Income from Sue410.0 |410.0Cost of sales(1,080.0) ||(840.0) |(1,920.0) ||Operating expenses(580.0) ||(160.0) ||(740.0)1,750.0Consolidated NI0.0Noncontrolling int. share. |Controlling share1,150.0600.01,750.0RETAINED EARNINGSRetained earn-Pay730.0730.0Retained earn-Sue360.0 |360.0Controlling share1,150.0600.01,750.0Dividends(600.0) |(200.0) |(800.0)Retained earn 12/311,280.0760.02,040.0BALANCE SHEETCash340.0120.0460.0Accounts receivable660.0400.0 |1,060.0Dividends receivable60.060.0Inventories240.0 |320.0 |560.0Land320.0200.0520.0920.0 |400.0 |Buildings-netEquipment-net1,320.0560.01,360.0 |1,540.0 |800.0Investment in Sue1,540.0 |Goodwill0.0Total assets4,880.02,000.06,880.0Accounts payableDividends payable900.0400.01,300.0280.080.0360.0Other liabilities620.0160.0 |780.0Common stock - $10 par |Retained earningsTotal equities600.0 |1,800.0 |1,280.02,400.0760.02,040.0 |4,880.02,000.0Noncontrolling interest0.00.00.06,880.0

P5-6 On 01.01.2011, Pay corporation acquired interest in Sue corporation = 75% Purchase…

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

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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