Sym Corporation, a wholly owned subsidiary of Paratec Corporation, leased equipment from its parent company on August 1, 2016. The terms of the agreement clearly do not require the lease to be accounted for as a capitallease. Both entities are accounting for the lease as an operating lease. The lease payment is $12,000 per year, paid in advance each August 1.Paratec purchased its investment in Sym on December 31, 2011, when Sym had a retained earnings balance of $150,000. Paratec is accounting for its investment in Sym under the cost method. Included in the original purchase price was a $50,000 premium attributable to Sym’s history of exceptional earnings.The December 31, 2018, trial balances of Paratec and its subsidiary are presented below. Paratec Corporation Sym CorporationCash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190,000 40,000Accounts Receivable (net) . . . . . . . . . . . . . 738,350 142,000Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 500,000 75,000Prepaid Rent on Equipment . . . . . . . . . . . . 7,000Investment in Bonds . . . . . . . . . . . . . . . . . . 250,000 65,000Investment in Sym Corporation . . . . . . . 400,000Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250,000 85,000Plant and Equipment . . . . . . . . . . . . . . . . 1,950,000 295,000Accumulated Depreciation-Plant and Eqmnt . (250,000) (60,000)Equipment Under Operating Lease . . . . 120,000Accumulated Dep. Assets Under Operating Lease (36,000)Accounts Payable . . . . . . . . . . . . . . .. . . . . . . (385,000) (52,000)Deferred Rent Revenue . . . . . . . . . . . . . . . . . . (7,000)Common Stock (no par). . . . . . . . . . . . . . . (2,000,000) (200,000)Retained Earnings, January 1, 2018. . . . . (1,076,350) (310,000)Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,720,000) (500,000)Rent Income . . . . . . . . . . . . . . . . . . . . . . . . . . . (12,000)Cost of Goods Sold . . . . . . . . . . . . . . . . . . . .3,068,000 300,000Rent Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,000Other Expenses . . . . . . . . . . . . . . . . . . . . . . . . 725,000 101,000Dividends Declared . . . . . . . . . . . . . . . . . . . . 295,000Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0Prepare the worksheet necessary to produce the consolidated income statement and balance sheet of Paratec Corporation and its subsidiary for the year ended December 31, 2018.
Sym Corporation, a wholly owned subsidiary of Paratec Corporation, leased equipment from its parent company on August 1, 2016. The terms of the agreement clearly do not require the lease to be accounted for as a capital
lease. Both entities are accounting for the lease as an operating lease. The lease payment is $12,000 per year, paid in advance each August 1.
Paratec purchased its investment in Sym on December 31, 2011, when Sym had a
The December 31, 2018,
Paratec Corporation Sym Corporation
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190,000 40,000
Accounts Receivable (net) . . . . . . . . . . . . . 738,350 142,000
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . .. . 500,000 75,000
Prepaid Rent on Equipment . . . . . . . . . . . . 7,000
Investment in Bonds . . . . . . . . . . . . . . . . . . 250,000 65,000
Investment in Sym Corporation . . . . . . . 400,000
Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250,000 85,000
Plant and Equipment . . . . . . . . . . . . . . . . 1,950,000 295,000
Accumulated
Equipment Under Operating Lease . . . . 120,000
Accumulated Dep. Assets Under Operating Lease (36,000)
Accounts Payable . . . . . . . . . . . . . . .. . . . . . . (385,000) (52,000)
Deferred Rent Revenue . . . . . . . . . . . . . . . . . . (7,000)
Common Stock (no par). . . . . . . . . . . . . . . (2,000,000) (200,000)
Retained Earnings, January 1, 2018. . . . . (1,076,350) (310,000)
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,720,000) (500,000)
Rent Income . . . . . . . . . . . . . . . . . . . . . . . . . . . (12,000)
Cost of Goods Sold . . . . . . . . . . . . . . . . . . . .3,068,000 300,000
Rent Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,000
Other Expenses . . . . . . . . . . . . . . . . . . . . . . . . 725,000 101,000
Dividends Declared . . . . . . . . . . . . . . . . . . . . 295,000
Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0
Prepare the worksheet necessary to produce the consolidated income statement and
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