Sal is a 90 percent-owned subsidiary of Pig Corporation, acquired at book value several years ago. Comparative separate-company income statements for the affiliates for 2011 are as follows:
| Pig Corporation | Sal Corporation |
Sales | $750,000 | $350,000 |
Income from Sal | 54,000 | — |
Gain on building | 15,000 | — |
Income credits | 819,000 | 350,000 |
Cost of sales | 500,000 | 200,000 |
Operating expenses | 150,000 | 75,000 |
Income debits | 650,000 | 275,000 |
Net income | $169,000 | $ 75,000 |
On January 5, 2011, Pig sold a building with a 10-year remaining useful life to Sal at a gain of $15,000. Sal paid dividends of $50,000 during 2011.
REQUIRED
1. Reconstruct the journal entries made by Pig during 2011 to account for its investment in Sal. Explanations of the journal entries are required.
2. Prepare a consolidated income statement for Pig Corporation and Subsidiary for 2011.
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