Pot Corporation purchased a 70 percent interest in Sod Corporation on January 2, 2011, for $98,000, when Sod had capital stock of $100,000 and retained earnings of $20,000. On June 30, 2012, Pot purchased an additional 20 percent interest for $37,000.
Comparative financial statements for Pot and Sod Corporations at and for the year ended December 31, 2012, are as follows (in thousands):
| Pot | Sod |
Combined Income and Retained Earnings Statement for the Year Ended December 31 | ||
Sales | $400 | $200 |
Income from Sod | 24 | — |
Cost of sales | (250) | (150) |
Expenses | (50) | (20) |
Net income | 124 | 30 |
Add: Beginning retained earnings | 200 | 50 |
Less: Dividends, December 1 | (64) | (10) |
Retained earnings, December 31 | $260 | $ 70 |
Balance Sheet at December 31 | ||
Other assets | $429 | $200 |
Investment in Sod | 171 | — |
Total assets | $600 | $200 |
Liabilities | $ 40 | $30 |
Common stock | 300 | 100 |
Retained earnings | 260 | 70 |
Total equities | $600 | $200 |
REQUIRED
1. Prepare a schedule explaining the $171,000 balance in Pot’s Investment in Sod account at December 31, 2012.
2. Compute goodwill that will appear in the December 31, 2012, consolidated balance sheet.
3. Prepare a schedule computing consolidated net income for 2012.
4. Compute consolidated retained earnings on December 31, 2012.
5. Compute noncontrolling interest on December 31, 2012.
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