Problem 4-9 (LO 2, 5) 90%, cost, merchandise, note payable. The December 31, 2016, trial balances of Pettie Corporation and its 90%-owned subsidiary Sunco Corporation are as follows: Pettie Corporation Sunco Corporation Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000 45,500 Accounts and Other Current Receivables . . . . . . . . . . . . . . . . . . . . . . . 410,900 170,000 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 920,000 739,400 Property, Plant, and Equipment (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 400,000 Investment in Sunco Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,260,000 Accounts Payable and Other Current Liabilities . . . . . . . . . . . . . . . . . . (140,000) (305,900) Common Stock ($10 par) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (500,000) Common Stock ($10 par) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (200,000) Retained Earnings, January 1, 2016. . . . . . . . . . . . . . . . . . . . . . . . . . . (2,800,000) (650,000) Dividends Declared. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000 Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,000,000) (650,000) Dividend Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (900) Interest Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000 Interest Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,000) Cost of Goods Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500,000 400,000 Other Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340,000 45,000 Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 Pettie’s investment in Sunco was purchased for $1,260,000 in cash on January 1, 2015, and was accounted for by the cost method. On January 1, 2015, Sunco had the following equity balances: Common stock. . . . . . . . . . . . . $200,000 Retained earnings . . . . . . . . . . 600,000 Total equity . . . . . . . . . . . . . $800,000 Pettie’s excess of cost over book value on Sunco’s investment has been identified as goodwill. Sunco borrowed $100,000 from Pettie on June 30, 2016, with the note maturing on June 30, 2017, at 10% interest. Correct accruals have been recorded by both companies. During 2016, Pettie sold merchandise to Sunco at an aggregate invoice price of $300,000, which included a profit of $75,000. As of December 31, 2016, Sunco had not paid Pettie for $90,000 of these purchases, and 10% of the total merchandise purchased from Pettie still remained in Sunco’s inventory. Sunco declared a $1,000 cash dividend in December 2016 payable in January 2017. Prepare the worksheet required to produce the consolidated statements of Pettie Corporation and its subsidiary, Sunco Corporation, for the year ended December 31, 2016. Include the valuation analysis, the determination and distribution of excess schedule, and the income distribution schedules.
Problem 4-9 (LO 2, 5) 90%, cost, merchandise, note payable. The December 31,
2016,
are as follows:
Pettie Corporation Sunco Corporation
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000 45,500
Accounts and Other Current Receivables . . . . . . . . . . . . . . . . . . . . . . . 410,900 170,000
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 920,000 739,400
Property, Plant, and Equipment (net) . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 400,000
Investment in Sunco Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,260,000
Accounts Payable and Other Current Liabilities . . . . . . . . . . . . . . . . . . (140,000) (305,900)
Common Stock ($10 par) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (500,000)
Common Stock ($10 par) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (200,000)
Dividends Declared. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,000,000) (650,000)
Dividend Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (900)
Interest Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
Interest Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,000)
Cost of Goods Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500,000 400,000
Other Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340,000 45,000
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0
Pettie’s investment in Sunco was purchased for $1,260,000 in cash on January 1, 2015, and
was accounted for by the cost method. On January 1, 2015, Sunco had the following equity
balances:
Common stock. . . . . . . . . . . . . $200,000
Retained earnings . . . . . . . . . . 600,000
Total equity . . . . . . . . . . . . . $800,000
Pettie’s excess of cost over book value on Sunco’s investment has been identified as goodwill.
Sunco borrowed $100,000 from Pettie on June 30, 2016, with the note maturing on June
30, 2017, at 10% interest. Correct accruals have been recorded by both companies.
During 2016, Pettie sold merchandise to Sunco at an aggregate invoice price of $300,000,
which included a profit of $75,000. As of December 31, 2016, Sunco had not paid Pettie for
$90,000 of these purchases, and 10% of the total merchandise purchased from Pettie still
remained in Sunco’s inventory.
Sunco declared a $1,000 cash dividend in December 2016 payable in January 2017.
Prepare the worksheet required to produce the consolidated statements of Pettie Corporation and its subsidiary, Sunco Corporation, for the year ended December 31, 2016. Include the
valuation analysis, the determination and distribution of excess schedule, and the income distribution schedules.
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