Question

Proud Corporation acquired 80 percent of Spirited Company’s voting stock on January 1, 20X3, at underlying book value. The fair value of the noncontrolling interest was equal to 20 percent of the book value of Spirited at that date. Assume that the accumulated depreciation on depreciable assets was $56,000 on the acquisition date. Proud uses the equity method in accounting for its ownership of Spirited. On December 31, 20X4, the trial balances of the two companies are as follows:
  

		Proud Corporation								Spirited Company
Item	Debit				Credit				Debit					Credit
Current Assets		$	237,000							$	160,000
Depreciable Assets			502,000								306,000
Investment in Spirited Company			123,520
Depreciation Expense			24,000								14,000
Other Expenses			141,000								87,000
Dividends Declared			52,000								24,600
Accumulated Depreciation						$	193,000							$	84,000
Current Liabilities							61,000								41,000
Long-Term Debt							77,920								186,600
Common Stock							195,000								81,000
Retained Earnings							279,000								51,000
Sales							236,000								148,000
Income from Spirited Company							37,600
		$	1,079,520			$	1,079,520			$	591,600			$	591,600

Required:
a. Prepare all consolidation entries required on December 31, 20X4, to prepare consolidated financial statements. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Record the basic consolidation entry. Record the optional accumulated depreciation consolidation entry.
b. Prepare a three-part consolidation worksheet as of December 31, 20X4. (Values in the first two columns (the "parent" and "subsidiary" balances) that are to be deducted should be indicated with a minus sign, while all values in the "Consolidation Entries" columns should be entered as positive values. For accounts where multiple adjusting entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet.)
  

Answer 1

PART A

Event	Accounts	debit	credit
1	Common Stock	81,000
	Retained earnings	51,000
	Income from spirited company	37,600
	NCI in NI of spirited company	9,400
	Dividends declared		24,600
	investment in spirited company		123,520
	NCI in NA in spirited company		30880

2	Accumulated depreciation	48,000
	Depreciable asset		48,000

PART B

PROUD CORPORATION AND SUBSIDIARY

Worksheet for consolidated financial statement

December 31,20X4

			Consolidation enteries
Income statement	Proud.corp	Spirited.co.	DR	CR	consolidated
Sales	$236,000	$148,000			$ 384,000
Less: Depreciation expense	$(24,000)	(14,000)			$(38,000)
Less: other expense	(141,000)	(87,000)			(228,000)
income spirited co	37,600	-	37,600
Consolidated Net income	108,600	47,000	37,600	-	118,000
NCI in Net income			9,400		(9,400)
Controlling interest net income	108,600	47,000	47,000	-	108,600
Statement in retained earnings
Begining balance	279,000	51,000	51,000		279,000
Net income	108,600	47,000	47,000	-	108,600
Less: Declared income	(52,000)	(24,600)		24,600	(52,000)
Ending balance	335,600	73,400	98,000	24,600	335,600
Balancesheet
Current Assets	237,000	160,000			397,000
Depreciable Assets	502,000	306,000		56,000	752,000
Less: Accumulated depreciation	(193,000)	(84,000)	56,000		(221,000)
Investment in spirited co	123,520			123,520
Total Asset	669,520	382,000	56,000	179,520	928,000
Liabilities And Equity
Current liabilities	61,000	41,000			102,000
Long term debt	77,920	186,600			264,520
Common stock	279,000	51,000	51,000		279,000
Retained earnings	236,000	148,000	98,000	24,600	236,000
NCI in NA of spirited co.				30,880	30,880

Total Liabilities and Equity

653,920

426,600

149,000

55480

912,400