E6.13 Consolidation Working Paper Eliminations, Intercompany Merchandise SalesPranceAthleticwear Company owns all of the voting stock of Stallion Shoes, Acquisition cost was $7 million inexcess of Stallion's book value of $3 million, and the excess was attributed entirely to goodwill. As of thebeginning of the current year, goodwill is impaired by $500,000. Goodwill is not impaired in the currentyear. Following is information on intercompany merchandise transactions between Prance and Stallionfor the current year:• Intercompany profit in Prance's beginning inventory, purchased from Stallion, is $300,000.• Intercompany profit in Stallion's beginning inventory, purchased from Prance, is $400,000.• Intercompany profit in Prance's ending inventory, purchased from Stallion, is $200,000.Intercompany profit in Stallion's ending inventory, purchased from Prance, is $250,000.Total sales from Stallion to Prance, at the price charged to Prance, were $7 million.Total sales from Prance to Stallion, at the price charged to Stallion, were $5 million.separate trial balances for Prance and Stallion at the end of the current year are below.Prance uses the complete equity method to account for its investment in Stallion on its own books. Thea.(in thousands)Current assetsPlant and equipment, net..Investment in Stallion.Liabilities...Capital stockRetained earnings, beginning..lated net income to theSales revenue.Equity in net income..Cost of sales..Operating expensesTotal.....:::*PranceDr (Cr)$ 2,500350,00012,050(353,300)(2,000)(6,000)(275,000)(1,250)200,00073,0000StallionDr (Cr)$ 1,500250,000(245,500)(1,000)(4,000)(150,000)LO 2, 490,00059,0000$RequiredPrepare a schedule calculating equity in net income for the current year, appearing on Prance'sseparate books ($1,250,000) and the end-of-year balance for Investment in Stallion, appearing onPrance's separate books ($12,050,000).b.Prepare a working paper to consolidate the trial balances of Prance and Stallion. Label your eliminat-ing entries (C), (I), (E), and (R).

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Required 4. Prepare a schedule calculating equity in net income for the current year, appearing on Prance's separate books ($1,250,000) and the end-of-year balance for Investment in Stallion, appearing on Prance's separate books ($12,050,000). b. Prepare a working paper to consolidate the trial balances of Prance and Stallion. Label your eliminat- ing entries (C), (I), (E), and (R).

Required 4. Prepare a schedule calculating equity in net income for the current year, appearing on Prance's separate books ($1,250,000) and the end-of-year balance for Investment in Stallion, appearing on Prance's separate books ($12,050,000). b. Prepare a working paper to consolidate the trial balances of Prance and Stallion. Label your eliminat- ing entries (C), (I), (E), and (R).

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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