Prepare a schedule that calculates the Equity in Earnings of Company S account balance.

Question

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Answer 1

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 5, Problem 32P

a.

To determine

Prepare a schedule that calculates the Equity in Earnings of Company S account balance.

a.

Expert Solution

Explanation of Solution

The schedule that calculates the Equity in Earnings of Company S account balance is as follows:

Particulars	Amount
Reported income of subsidiary	$ 230,000
Add: Unrealized profit of 2017 (1)	$ 35,000
Less: Unrealized profit of 2018 (2)	$ (40,000)
Less: Amortization expense of 2018	$ (70,000)
Net income of subsidiary	$ 155,000
Percentage ownership of controlling interest	80%
Equity in earnings of Company S in 2018	$ 124,000

Table: (1)

Working note:

Computation of unrealized gross profit:

2017:

Unrealized gross profit = $125,000 × 28%= $35,000 (1)

2018:

Unrealized gross profit = $160,000 × 25%= $40,000 (2)

b.

To determine

Prepare a worksheet to arrive at consolidated figures for external reporting purposes.

b.

Expert Solution

Explanation of Solution

The worksheet to arrive at consolidated figures for external reporting purposes:

Income statement	Company P	Company S	Debit	Credit	Non-controlling interest	Consolidated Balances
Revenues	$ (1,740,000)	$ (950,000)	$ 300,000			$ (2,390,000)
Cost of goods sold	$ 820,000	$ 500,000	$ 40,000	$ 35,000		$ 1,025,000
				$ 300,000
Depreciation expense	$ 104,000	$ 85,000				$ 189,000
Amortization expense	$ 220,000	$ 120,000	$ 70,000			$ 410,000
Interest expense	$ 20,000	$ 15,000				$ 35,000
Equity in income of Company S	$ (124,000)		$ 124,000			$ -
Net income	$ (700,000)	$ (230,000)
Consolidated net income						$ (731,000)
Share of non-controlling interest in net income					$ (31,000)	$ 31,000
Share of controlling interest in net income						$ (700,000)

Balance Sheet
Cash	$ 535,000	$ 115,000				$ 650,000
Account receivables	$ 575,000	$ 215,000				$ 790,000
Inventory	$ 990,000	$ 800,000		$ 40,000		$ 1,750,000
Investment in Company S	$ 1,420,000	$ -	$ 20,000	$ 40,000		$ -
				$ 968,000
				$ 348,000
				$ 124,000
Building and equipment	$ 1,025,000	$ 863,000				$ 1,888,000
Patents	$ 950,000	$ 107,000	$ 210,000	$ 70,000		$ 1,197,000
Goodwill		$ -	$ 225,000			$ 225,000
Total assets	$ 5,495,000	$ 2,100,000				$ 6,500,000

Accounts payable	$ (450,000)	$ (200,000)				$ (650,000)
Notes payable	$ (545,000)	$ (450,000)				$ (995,000)
Common stock	$ (900,000)	$ (800,000)	$ 800,000			$ (900,000)
Additional paid-in Capital	$ (300,000)	$ (100,000)	$ 100,000			$ (300,000)
Retained earnings on 12/31	$ (3,300,000)	$ (550,000)				$ (3,300,000)
Non-controlling interest in Company S				$ 242,000
				$ 87,000	$(355,000)	$ (355,000)
Total liabilities and equity	$ (5,495,000)	$ (2,100,000)				$ (6,500,000)

Table: (2)

Working note:

Statement of retained earnings	Company P	Company S	Debit	Credit	Non-controlling interest	Consolidated Balances
Retained earnings on 01/01	$ (2,800,000)	$ (345,000)	$ 310,000			$ (2,800,000)
			$ 35,000
Net Income	$ (700,000)	$ (230,000)				$ (700,000)
Dividends declared	$ 200,000	$ 25,000		D 20,000	D 5,000	$ 200,000
Retained earnings on 31/12	$ (3,300,000)	$ (550,000)				$ (3,300,000)

Table: (3)

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Answer 2

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 5, Problem 32P

a.

To determine

Prepare a schedule that calculates the Equity in Earnings of Company S account balance.

a.

Expert Solution

Explanation of Solution

The schedule that calculates the Equity in Earnings of Company S account balance is as follows:

Particulars	Amount
Reported income of subsidiary	$ 230,000
Add: Unrealized profit of 2017 (1)	$ 35,000
Less: Unrealized profit of 2018 (2)	$ (40,000)
Less: Amortization expense of 2018	$ (70,000)
Net income of subsidiary	$ 155,000
Percentage ownership of controlling interest	80%
Equity in earnings of Company S in 2018	$ 124,000

Table: (1)

Working note:

Computation of unrealized gross profit:

2017:

Unrealized gross profit = $125,000 × 28%= $35,000 (1)

2018:

Unrealized gross profit = $160,000 × 25%= $40,000 (2)

b.

To determine

Prepare a worksheet to arrive at consolidated figures for external reporting purposes.

b.

Expert Solution

Explanation of Solution

The worksheet to arrive at consolidated figures for external reporting purposes:

Income statement	Company P	Company S	Debit	Credit	Non-controlling interest	Consolidated Balances
Revenues	$ (1,740,000)	$ (950,000)	$ 300,000			$ (2,390,000)
Cost of goods sold	$ 820,000	$ 500,000	$ 40,000	$ 35,000		$ 1,025,000
				$ 300,000
Depreciation expense	$ 104,000	$ 85,000				$ 189,000
Amortization expense	$ 220,000	$ 120,000	$ 70,000			$ 410,000
Interest expense	$ 20,000	$ 15,000				$ 35,000
Equity in income of Company S	$ (124,000)		$ 124,000			$ -
Net income	$ (700,000)	$ (230,000)
Consolidated net income						$ (731,000)
Share of non-controlling interest in net income					$ (31,000)	$ 31,000
Share of controlling interest in net income						$ (700,000)

Balance Sheet
Cash	$ 535,000	$ 115,000				$ 650,000
Account receivables	$ 575,000	$ 215,000				$ 790,000
Inventory	$ 990,000	$ 800,000		$ 40,000		$ 1,750,000
Investment in Company S	$ 1,420,000	$ -	$ 20,000	$ 40,000		$ -
				$ 968,000
				$ 348,000
				$ 124,000
Building and equipment	$ 1,025,000	$ 863,000				$ 1,888,000
Patents	$ 950,000	$ 107,000	$ 210,000	$ 70,000		$ 1,197,000
Goodwill		$ -	$ 225,000			$ 225,000
Total assets	$ 5,495,000	$ 2,100,000				$ 6,500,000

Accounts payable	$ (450,000)	$ (200,000)				$ (650,000)
Notes payable	$ (545,000)	$ (450,000)				$ (995,000)
Common stock	$ (900,000)	$ (800,000)	$ 800,000			$ (900,000)
Additional paid-in Capital	$ (300,000)	$ (100,000)	$ 100,000			$ (300,000)
Retained earnings on 12/31	$ (3,300,000)	$ (550,000)				$ (3,300,000)
Non-controlling interest in Company S				$ 242,000
				$ 87,000	$(355,000)	$ (355,000)
Total liabilities and equity	$ (5,495,000)	$ (2,100,000)				$ (6,500,000)

Table: (2)

Working note:

Statement of retained earnings	Company P	Company S	Debit	Credit	Non-controlling interest	Consolidated Balances
Retained earnings on 01/01	$ (2,800,000)	$ (345,000)	$ 310,000			$ (2,800,000)
			$ 35,000
Net Income	$ (700,000)	$ (230,000)				$ (700,000)
Dividends declared	$ 200,000	$ 25,000		D 20,000	D 5,000	$ 200,000
Retained earnings on 31/12	$ (3,300,000)	$ (550,000)				$ (3,300,000)

Table: (3)

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Answer 3

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 5, Problem 32P

a.

To determine

Prepare a schedule that calculates the Equity in Earnings of Company S account balance.

a.

Expert Solution

Explanation of Solution

The schedule that calculates the Equity in Earnings of Company S account balance is as follows:

Particulars	Amount
Reported income of subsidiary	$ 230,000
Add: Unrealized profit of 2017 (1)	$ 35,000
Less: Unrealized profit of 2018 (2)	$ (40,000)
Less: Amortization expense of 2018	$ (70,000)
Net income of subsidiary	$ 155,000
Percentage ownership of controlling interest	80%
Equity in earnings of Company S in 2018	$ 124,000

Table: (1)

Working note:

Computation of unrealized gross profit:

2017:

Unrealized gross profit = $125,000 × 28%= $35,000 (1)

2018:

Unrealized gross profit = $160,000 × 25%= $40,000 (2)

b.

To determine

Prepare a worksheet to arrive at consolidated figures for external reporting purposes.

b.

Expert Solution

Explanation of Solution

The worksheet to arrive at consolidated figures for external reporting purposes:

Income statement	Company P	Company S	Debit	Credit	Non-controlling interest	Consolidated Balances
Revenues	$ (1,740,000)	$ (950,000)	$ 300,000			$ (2,390,000)
Cost of goods sold	$ 820,000	$ 500,000	$ 40,000	$ 35,000		$ 1,025,000
				$ 300,000
Depreciation expense	$ 104,000	$ 85,000				$ 189,000
Amortization expense	$ 220,000	$ 120,000	$ 70,000			$ 410,000
Interest expense	$ 20,000	$ 15,000				$ 35,000
Equity in income of Company S	$ (124,000)		$ 124,000			$ -
Net income	$ (700,000)	$ (230,000)
Consolidated net income						$ (731,000)
Share of non-controlling interest in net income					$ (31,000)	$ 31,000
Share of controlling interest in net income						$ (700,000)

Balance Sheet
Cash	$ 535,000	$ 115,000				$ 650,000
Account receivables	$ 575,000	$ 215,000				$ 790,000
Inventory	$ 990,000	$ 800,000		$ 40,000		$ 1,750,000
Investment in Company S	$ 1,420,000	$ -	$ 20,000	$ 40,000		$ -
				$ 968,000
				$ 348,000
				$ 124,000
Building and equipment	$ 1,025,000	$ 863,000				$ 1,888,000
Patents	$ 950,000	$ 107,000	$ 210,000	$ 70,000		$ 1,197,000
Goodwill		$ -	$ 225,000			$ 225,000
Total assets	$ 5,495,000	$ 2,100,000				$ 6,500,000

Accounts payable	$ (450,000)	$ (200,000)				$ (650,000)
Notes payable	$ (545,000)	$ (450,000)				$ (995,000)
Common stock	$ (900,000)	$ (800,000)	$ 800,000			$ (900,000)
Additional paid-in Capital	$ (300,000)	$ (100,000)	$ 100,000			$ (300,000)
Retained earnings on 12/31	$ (3,300,000)	$ (550,000)				$ (3,300,000)
Non-controlling interest in Company S				$ 242,000
				$ 87,000	$(355,000)	$ (355,000)
Total liabilities and equity	$ (5,495,000)	$ (2,100,000)				$ (6,500,000)

Table: (2)

Working note:

Statement of retained earnings	Company P	Company S	Debit	Credit	Non-controlling interest	Consolidated Balances
Retained earnings on 01/01	$ (2,800,000)	$ (345,000)	$ 310,000			$ (2,800,000)
			$ 35,000
Net Income	$ (700,000)	$ (230,000)				$ (700,000)
Dividends declared	$ 200,000	$ 25,000		D 20,000	D 5,000	$ 200,000
Retained earnings on 31/12	$ (3,300,000)	$ (550,000)				$ (3,300,000)

Table: (3)

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Answer 4

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 5, Problem 32P

a.

To determine

Prepare a schedule that calculates the Equity in Earnings of Company S account balance.

a.

Expert Solution

Explanation of Solution

The schedule that calculates the Equity in Earnings of Company S account balance is as follows:

Particulars	Amount
Reported income of subsidiary	$ 230,000
Add: Unrealized profit of 2017 (1)	$ 35,000
Less: Unrealized profit of 2018 (2)	$ (40,000)
Less: Amortization expense of 2018	$ (70,000)
Net income of subsidiary	$ 155,000
Percentage ownership of controlling interest	80%
Equity in earnings of Company S in 2018	$ 124,000

Table: (1)

Working note:

Computation of unrealized gross profit:

2017:

Unrealized gross profit = $125,000 × 28%= $35,000 (1)

2018:

Unrealized gross profit = $160,000 × 25%= $40,000 (2)

b.

To determine

Prepare a worksheet to arrive at consolidated figures for external reporting purposes.

b.

Expert Solution

Explanation of Solution

The worksheet to arrive at consolidated figures for external reporting purposes:

Income statement	Company P	Company S	Debit	Credit	Non-controlling interest	Consolidated Balances
Revenues	$ (1,740,000)	$ (950,000)	$ 300,000			$ (2,390,000)
Cost of goods sold	$ 820,000	$ 500,000	$ 40,000	$ 35,000		$ 1,025,000
				$ 300,000
Depreciation expense	$ 104,000	$ 85,000				$ 189,000
Amortization expense	$ 220,000	$ 120,000	$ 70,000			$ 410,000
Interest expense	$ 20,000	$ 15,000				$ 35,000
Equity in income of Company S	$ (124,000)		$ 124,000			$ -
Net income	$ (700,000)	$ (230,000)
Consolidated net income						$ (731,000)
Share of non-controlling interest in net income					$ (31,000)	$ 31,000
Share of controlling interest in net income						$ (700,000)

Balance Sheet
Cash	$ 535,000	$ 115,000				$ 650,000
Account receivables	$ 575,000	$ 215,000				$ 790,000
Inventory	$ 990,000	$ 800,000		$ 40,000		$ 1,750,000
Investment in Company S	$ 1,420,000	$ -	$ 20,000	$ 40,000		$ -
				$ 968,000
				$ 348,000
				$ 124,000
Building and equipment	$ 1,025,000	$ 863,000				$ 1,888,000
Patents	$ 950,000	$ 107,000	$ 210,000	$ 70,000		$ 1,197,000
Goodwill		$ -	$ 225,000			$ 225,000
Total assets	$ 5,495,000	$ 2,100,000				$ 6,500,000

Accounts payable	$ (450,000)	$ (200,000)				$ (650,000)
Notes payable	$ (545,000)	$ (450,000)				$ (995,000)
Common stock	$ (900,000)	$ (800,000)	$ 800,000			$ (900,000)
Additional paid-in Capital	$ (300,000)	$ (100,000)	$ 100,000			$ (300,000)
Retained earnings on 12/31	$ (3,300,000)	$ (550,000)				$ (3,300,000)
Non-controlling interest in Company S				$ 242,000
				$ 87,000	$(355,000)	$ (355,000)
Total liabilities and equity	$ (5,495,000)	$ (2,100,000)				$ (6,500,000)

Table: (2)

Working note:

Statement of retained earnings	Company P	Company S	Debit	Credit	Non-controlling interest	Consolidated Balances
Retained earnings on 01/01	$ (2,800,000)	$ (345,000)	$ 310,000			$ (2,800,000)
			$ 35,000
Net Income	$ (700,000)	$ (230,000)				$ (700,000)
Dividends declared	$ 200,000	$ 25,000		D 20,000	D 5,000	$ 200,000
Retained earnings on 31/12	$ (3,300,000)	$ (550,000)				$ (3,300,000)

Table: (3)

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Answer 5

Chapter 5, Problem 32P

a.

To determine

Prepare a schedule that calculates the Equity in Earnings of Company S account balance.

a.

Expert Solution

Explanation of Solution

The schedule that calculates the Equity in Earnings of Company S account balance is as follows:

Particulars	Amount
Reported income of subsidiary	$ 230,000
Add: Unrealized profit of 2017 (1)	$ 35,000
Less: Unrealized profit of 2018 (2)	$ (40,000)
Less: Amortization expense of 2018	$ (70,000)
Net income of subsidiary	$ 155,000
Percentage ownership of controlling interest	80%
Equity in earnings of Company S in 2018	$ 124,000

Table: (1)

Working note:

Computation of unrealized gross profit:

2017:

Unrealized gross profit = $125,000 × 28%= $35,000 (1)

2018:

Unrealized gross profit = $160,000 × 25%= $40,000 (2)

b.

To determine

Prepare a worksheet to arrive at consolidated figures for external reporting purposes.

b.

Expert Solution

Explanation of Solution

The worksheet to arrive at consolidated figures for external reporting purposes:

Income statement	Company P	Company S	Debit	Credit	Non-controlling interest	Consolidated Balances
Revenues	$ (1,740,000)	$ (950,000)	$ 300,000			$ (2,390,000)
Cost of goods sold	$ 820,000	$ 500,000	$ 40,000	$ 35,000		$ 1,025,000
				$ 300,000
Depreciation expense	$ 104,000	$ 85,000				$ 189,000
Amortization expense	$ 220,000	$ 120,000	$ 70,000			$ 410,000
Interest expense	$ 20,000	$ 15,000				$ 35,000
Equity in income of Company S	$ (124,000)		$ 124,000			$ -
Net income	$ (700,000)	$ (230,000)
Consolidated net income						$ (731,000)
Share of non-controlling interest in net income					$ (31,000)	$ 31,000
Share of controlling interest in net income						$ (700,000)

Balance Sheet
Cash	$ 535,000	$ 115,000				$ 650,000
Account receivables	$ 575,000	$ 215,000				$ 790,000
Inventory	$ 990,000	$ 800,000		$ 40,000		$ 1,750,000
Investment in Company S	$ 1,420,000	$ -	$ 20,000	$ 40,000		$ -
				$ 968,000
				$ 348,000
				$ 124,000
Building and equipment	$ 1,025,000	$ 863,000				$ 1,888,000
Patents	$ 950,000	$ 107,000	$ 210,000	$ 70,000		$ 1,197,000
Goodwill		$ -	$ 225,000			$ 225,000
Total assets	$ 5,495,000	$ 2,100,000				$ 6,500,000

Accounts payable	$ (450,000)	$ (200,000)				$ (650,000)
Notes payable	$ (545,000)	$ (450,000)				$ (995,000)
Common stock	$ (900,000)	$ (800,000)	$ 800,000			$ (900,000)
Additional paid-in Capital	$ (300,000)	$ (100,000)	$ 100,000			$ (300,000)
Retained earnings on 12/31	$ (3,300,000)	$ (550,000)				$ (3,300,000)
Non-controlling interest in Company S				$ 242,000
				$ 87,000	$(355,000)	$ (355,000)
Total liabilities and equity	$ (5,495,000)	$ (2,100,000)				$ (6,500,000)

Table: (2)

Working note:

Statement of retained earnings	Company P	Company S	Debit	Credit	Non-controlling interest	Consolidated Balances
Retained earnings on 01/01	$ (2,800,000)	$ (345,000)	$ 310,000			$ (2,800,000)
			$ 35,000
Net Income	$ (700,000)	$ (230,000)				$ (700,000)
Dividends declared	$ 200,000	$ 25,000		D 20,000	D 5,000	$ 200,000
Retained earnings on 31/12	$ (3,300,000)	$ (550,000)				$ (3,300,000)

Table: (3)

Answer 6

Chapter 5, Problem 32P

a.

To determine

Prepare a schedule that calculates the Equity in Earnings of Company S account balance.

a.

Expert Solution

Explanation of Solution

The schedule that calculates the Equity in Earnings of Company S account balance is as follows:

Particulars	Amount
Reported income of subsidiary	$ 230,000
Add: Unrealized profit of 2017 (1)	$ 35,000
Less: Unrealized profit of 2018 (2)	$ (40,000)
Less: Amortization expense of 2018	$ (70,000)
Net income of subsidiary	$ 155,000
Percentage ownership of controlling interest	80%
Equity in earnings of Company S in 2018	$ 124,000

Table: (1)

Working note:

Computation of unrealized gross profit:

2017:

Unrealized gross profit = $125,000 × 28%= $35,000 (1)

2018:

Unrealized gross profit = $160,000 × 25%= $40,000 (2)

Answer 7

Chapter 5, Problem 32P

a.

To determine

Prepare a schedule that calculates the Equity in Earnings of Company S account balance.

Answer 8

a.

Expert Solution

Explanation of Solution

The schedule that calculates the Equity in Earnings of Company S account balance is as follows:

Particulars	Amount
Reported income of subsidiary	$ 230,000
Add: Unrealized profit of 2017 (1)	$ 35,000
Less: Unrealized profit of 2018 (2)	$ (40,000)
Less: Amortization expense of 2018	$ (70,000)
Net income of subsidiary	$ 155,000
Percentage ownership of controlling interest	80%
Equity in earnings of Company S in 2018	$ 124,000

Table: (1)

Working note:

Computation of unrealized gross profit:

2017:

Unrealized gross profit = $125,000 × 28%= $35,000 (1)

2018:

Unrealized gross profit = $160,000 × 25%= $40,000 (2)

Answer 9

a.

Expert Solution

Answer 10

a.

Expert Solution

Answer 11

Expert Solution

Answer 12

b.

To determine

Prepare a worksheet to arrive at consolidated figures for external reporting purposes.

b.

Expert Solution

Explanation of Solution

The worksheet to arrive at consolidated figures for external reporting purposes:

Income statement	Company P	Company S	Debit	Credit	Non-controlling interest	Consolidated Balances
Revenues	$ (1,740,000)	$ (950,000)	$ 300,000			$ (2,390,000)
Cost of goods sold	$ 820,000	$ 500,000	$ 40,000	$ 35,000		$ 1,025,000
				$ 300,000
Depreciation expense	$ 104,000	$ 85,000				$ 189,000
Amortization expense	$ 220,000	$ 120,000	$ 70,000			$ 410,000
Interest expense	$ 20,000	$ 15,000				$ 35,000
Equity in income of Company S	$ (124,000)		$ 124,000			$ -
Net income	$ (700,000)	$ (230,000)
Consolidated net income						$ (731,000)
Share of non-controlling interest in net income					$ (31,000)	$ 31,000
Share of controlling interest in net income						$ (700,000)

Balance Sheet
Cash	$ 535,000	$ 115,000				$ 650,000
Account receivables	$ 575,000	$ 215,000				$ 790,000
Inventory	$ 990,000	$ 800,000		$ 40,000		$ 1,750,000
Investment in Company S	$ 1,420,000	$ -	$ 20,000	$ 40,000		$ -
				$ 968,000
				$ 348,000
				$ 124,000
Building and equipment	$ 1,025,000	$ 863,000				$ 1,888,000
Patents	$ 950,000	$ 107,000	$ 210,000	$ 70,000		$ 1,197,000
Goodwill		$ -	$ 225,000			$ 225,000
Total assets	$ 5,495,000	$ 2,100,000				$ 6,500,000

Accounts payable	$ (450,000)	$ (200,000)				$ (650,000)
Notes payable	$ (545,000)	$ (450,000)				$ (995,000)
Common stock	$ (900,000)	$ (800,000)	$ 800,000			$ (900,000)
Additional paid-in Capital	$ (300,000)	$ (100,000)	$ 100,000			$ (300,000)
Retained earnings on 12/31	$ (3,300,000)	$ (550,000)				$ (3,300,000)
Non-controlling interest in Company S				$ 242,000
				$ 87,000	$(355,000)	$ (355,000)
Total liabilities and equity	$ (5,495,000)	$ (2,100,000)				$ (6,500,000)

Table: (2)

Working note:

Statement of retained earnings	Company P	Company S	Debit	Credit	Non-controlling interest	Consolidated Balances
Retained earnings on 01/01	$ (2,800,000)	$ (345,000)	$ 310,000			$ (2,800,000)
			$ 35,000
Net Income	$ (700,000)	$ (230,000)				$ (700,000)
Dividends declared	$ 200,000	$ 25,000		D 20,000	D 5,000	$ 200,000
Retained earnings on 31/12	$ (3,300,000)	$ (550,000)				$ (3,300,000)

Table: (3)

Answer 13

b.

To determine

Prepare a worksheet to arrive at consolidated figures for external reporting purposes.

Answer 14

b.

Expert Solution

Explanation of Solution

The worksheet to arrive at consolidated figures for external reporting purposes:

Income statement	Company P	Company S	Debit	Credit	Non-controlling interest	Consolidated Balances
Revenues	$ (1,740,000)	$ (950,000)	$ 300,000			$ (2,390,000)
Cost of goods sold	$ 820,000	$ 500,000	$ 40,000	$ 35,000		$ 1,025,000
				$ 300,000
Depreciation expense	$ 104,000	$ 85,000				$ 189,000
Amortization expense	$ 220,000	$ 120,000	$ 70,000			$ 410,000
Interest expense	$ 20,000	$ 15,000				$ 35,000
Equity in income of Company S	$ (124,000)		$ 124,000			$ -
Net income	$ (700,000)	$ (230,000)
Consolidated net income						$ (731,000)
Share of non-controlling interest in net income					$ (31,000)	$ 31,000
Share of controlling interest in net income						$ (700,000)

Balance Sheet
Cash	$ 535,000	$ 115,000				$ 650,000
Account receivables	$ 575,000	$ 215,000				$ 790,000
Inventory	$ 990,000	$ 800,000		$ 40,000		$ 1,750,000
Investment in Company S	$ 1,420,000	$ -	$ 20,000	$ 40,000		$ -
				$ 968,000
				$ 348,000
				$ 124,000
Building and equipment	$ 1,025,000	$ 863,000				$ 1,888,000
Patents	$ 950,000	$ 107,000	$ 210,000	$ 70,000		$ 1,197,000
Goodwill		$ -	$ 225,000			$ 225,000
Total assets	$ 5,495,000	$ 2,100,000				$ 6,500,000

Accounts payable	$ (450,000)	$ (200,000)				$ (650,000)
Notes payable	$ (545,000)	$ (450,000)				$ (995,000)
Common stock	$ (900,000)	$ (800,000)	$ 800,000			$ (900,000)
Additional paid-in Capital	$ (300,000)	$ (100,000)	$ 100,000			$ (300,000)
Retained earnings on 12/31	$ (3,300,000)	$ (550,000)				$ (3,300,000)
Non-controlling interest in Company S				$ 242,000
				$ 87,000	$(355,000)	$ (355,000)
Total liabilities and equity	$ (5,495,000)	$ (2,100,000)				$ (6,500,000)

Table: (2)

Working note:

Statement of retained earnings	Company P	Company S	Debit	Credit	Non-controlling interest	Consolidated Balances
Retained earnings on 01/01	$ (2,800,000)	$ (345,000)	$ 310,000			$ (2,800,000)
			$ 35,000
Net Income	$ (700,000)	$ (230,000)				$ (700,000)
Dividends declared	$ 200,000	$ 25,000		D 20,000	D 5,000	$ 200,000
Retained earnings on 31/12	$ (3,300,000)	$ (550,000)				$ (3,300,000)