Question

and please tell me the journals

P5-7 Consolidation workpapers (upstream sales, no Pal Corporation $2700,000 cash, when Sal had capital stock of $2,000,000 and retained earnings of $500,000. All Sal's tion purchased a 90 percent interest in Sal Corporation on December 31, 2010 for asets and liabilties were recorded at fair values when Pal acquired its interest. The excess of fair value over book value is due to previously unrecorded patent s and is being amortized over a 10-year period. The Pal-Sal affiliation is a vertically integrated merchandising operation, with Sal selling all of its output to Pal Corporation at 140 percent of its cost. Pal sells the merchandise acquired from Sal at 150 percent of its purchase price from Sal. All of Pal's December 31, 2011, and Decem- ber 31, 2012, inventories of $280,000 and $420,000, respectively, were acquired from Sal. Sal's December 31, 2011, and December 31, 2012, inventories were $800,000 each. ed to Sal from 20 Pals accounts payable at December 31, 2012, includes 5100,000 owed to Sal and for the v purchases tive financial statements for Pal Corporation and Sal Corporation at Comparative financi Pal Sal ended December 31, 2012, are as follows (in thousands): Combined Income and Retained Earnings Statement for the Year Ended December 31, 2012 Sales Income from Sal Cost of sales Other expenses $8,190 819 (5,460) (1,544) 2,005 1,200 (1,000) $2,205 $5,600 4,000) (600) 1,000 700 (500) $1,200 Net income Add: Beginning retained earnings Deduct: Dividends Retained earnings December 31, 2012 Balance Sheet at December 31, 2012 Cash Inventory Other current assets Plant assets-net Investment in Sal $ 500 800 200 3,000 $753 420 600 3,000 3,132 $7,905 $1,700 4,000 2,205 $7,905 $4,500 $1,300 2,000 1,200 $4,500 Total assets Current liabilities Capital stocik Retained earnings Total equities REQUIRED: Prepare consolidation workpapers for Pal Corporation and Subsidiary for the yerca December 31, 2012.

Answer 1

Note :	Followings are the journal entries as you specifically required from the Problem.
	Journal Entries -In the books of pal corporation
		In $
Date	Particulars	Debit	Credit
31.12.2010	Investment in Sal Corporation	2700000
	To cash account		2700000
	(being 90% of stock of Sal corporation purchased by pal corporation at face value of stock Rs. 180000)
	Journal Entries -In the books of Sal corporation
		In $
Date	Particulars	Debit	Credit
31.12.2010	Cash	2700000
	To capital stock		2700000
	(being 90% of stock of Sal corporation purchased by pal corporation at face value of stock Rs. 180000)
	Journal Entries -In the books of Consolidated financial statement
31.12.2011	Unrealized stock reserve account	80000
	To inventories (Pal corporations)		80000
	(being unrealized profit on stock received from subsidiary company (Sal corporations) by pal corporation has been eliminated)
31.3.2012	Pal's corporation payable account	100000
	To Sal's corporations receivable account		100000
	(being amount receivables and payable in consolidated books get cancelled off)
31.3.2012	Retail earning account (Sal Corporations)	500000
	To Profit and loss account (Pal Corporations)		500000
	(Being dividend deducted from correct source for the purpose of consolidation)-(Note-1)
31.3.2012	Revenue profit of Sal's corporation	1080000
	To Consolidated retain earnings		1080000
	(being amount revenue transferred to consolidated financial statement)-(Note-3)
31.3.2012	Retain earnings(Pal corporations)	90000
	To patent account		90000
	(being patent amortized for current years)-(Note-1)
31.3.2012	Revenue profit (Sal's corporations)	120000
	To Minority interest		120000
	(being profit transferred to minority interest under consolidated financial statements (Note-4))
31.3.2012	Consolidated cash	1253000
	Consolidated Inventories	1140000
	Consolidated other current assets	700000
	Consolidated Plant assets	6000000
	To cash		500000
	To Inventories		800000
	To other current assets		100000
	To Plant assets		3000000
	To cash		753000
	To Inventories		340000
	To other current assets		600000
	To Plant assets		3000000
	(being assets of pal corporations ans Sal corporations has been transferred to consolidated balance sheet)
31.3.2012	Capital stock (Pal corporations)	4000000
	Current liabilities ( Pal corporations)	1600000
	Current liabilities ( Sal corporations)	1300000
	To consolidated capital stock		4000000
	To Consolidated Liabilities		2900000
	( being capital stock transferred to consolidated balance sheet)
Working Notes
1	Analysis of profit of sal corporation
		Capital Profit	Revenues profit
	Retain earnings	500000	-
	Profits (1200000-500000)		700000
	Dividend	-500000	500000
	Correct profits	0	1200000
	Share of profit of pal corporations (90%)	0	1080000
	Minority interest	0	120000
2	Calculation of capital cost/ Patent
	Capital stock		1800000
	ADD : capital profit		0
	LESS : Investment		-2700000
	Patent		900000
	Less : Patent amortized		-180000
	Net balance patent		720000
	Patent amortization for current years		90000
3	Consolidated retain earnings		Amount
	Pal corporations retain earnings		2205000
	Less: unrealized profit on inventory sale by sal corporation to pal corporations		80000
	Add: Revenue profit of Sal corporations		1080000
	Less : Patent amortized		-90000
		Total	3275000
4	Minority interest
	Capital stock		1800000
	Add: Revenue profit of Sal corporations		120000
		Total	1920000