Worksheet, two subsidiaries, preferred stock, intercompany merchandise and fixed assets,...

Worksheet, two subsidiaries, preferred stock, intercompany merchandise and fixed assets, bonds. The following information pertains to Titan Corporation and its two subsidiaries, Boat Corporation and Engine Corporation:

a. The three corporations are all in the same industry and their operations are homogeneous. Titan Corporation exercises control over the boards of directors of Boat Corporation and Engine Corporation and has installed new principal officers in both.

b. Boat Corporation has a retained earnings balance of $92,000 at January 1, 2017, and has income of $15,000 for the first three months of 2017 and $20,000 for the first six months of 2018.

c. Titan Corporation acquires 250 shares of fully participating Engine preferred stock for $7,000 and 14,000 shares of Engine common stock for $196,000 on January 2, 2018. Engine Corporation has a net income of $20,000 in 2018 and does not declare any dividends.

d. Engine Corporation’s inventory includes $22,400 of merchandise acquired from Boat Corporation subsequent to July 2018, for which no payment has been made. Boat Corporation marks up the merchandise 40% on cost.

e. Titan Corporation acquires in the open market twenty-five $1,000, 6% bonds of Boat Corporation for $21,400 on January 1, 2015. Boat Corporation bonds mature December 31, 2020. Interest is paid each June 30 and December 31. Straight-line amortization is allowed on the basis of materiality.

f. The 2018 year-end balance in the investment in Boat Corporation stock account is composed of the items shown in the following schedule:

1. Prepare any adjustment needed to the investment account as a result of the July 1, 2018, acquisition.

2. Prepare the worksheet necessary to produce the consolidated financial statements of Titan Corporation and its subsidiaries as of December 31, 2018. Correct the trial balances prior to consolidating. Consolidated retained earnings should be allocated to Titan Corporation, and the NCIs should be shown separately in the Consolidated Balance Sheet column. All supporting computations and schedules should be in good form.