Consolidation Worksheet—Year after Retirement
Bennett Corporation owns 60 percent of the stock of Stone Container Company, which it acquired at book value in 20X1. At that date, the fair value of the noncontrolling interest was equal to 40 percent of the book value of Stone. On December 31, 20X3, Bennett purchased $100,000 par value of Stone bonds. Stone originally issued the bonds at par value. The bonds' coupon rate is 9 percent. Interest is paid semiannually on June 30 and December 31. Trial balances for the two companies on December 31, 20X4, are as follows:
| Bennett Corporation | Stone Container Company | ||
Item | Debit | Credit | Debit | Credit |
Cash | $ 61,600 |
| $ 20,000 |
|
Accounts Receivable | 1,00,000 |
| 80,000 |
|
Inventory | 1,20,000 |
| 1,10,000 |
|
Other Assets | 3,40,000 |
| 2,50,000 |
|
Investment in Stone Container Bonds | 1,06,000 |
|
|
|
Investment in Stone Container Stock | 1,22,400 |
|
|
|
Interest Expense | 20,000 |
| 18,000 |
|
Other Expenses | $ 368,600 |
| $182,000 |
|
Dividends Declared | 40,000 |
| 10,000 |
|
Accounts Payable |
| $ 80,000 |
| $ 50,000 |
Bonds Payable |
| 2,00,000 |
| 2,00,000 |
Common Stock |
| 3,00,000 |
| 1,00,000 |
Retained Earnings |
| 2,10,000 |
| 70,000 |
Sales |
| 4,50,000 |
| 2,50,000 |
Interest Income |
| 8,000 |
|
|
Income from Stone Container Co. |
| 30,600 |
|
|
Total | $1,278,600 | $1,278,600 | $670,000 | $670,000 |
All interest income recognized by Bennett is related to its investment in Stone bonds. Assume Bennett uses the fully adjusted equity method.
Required
a.Prepare a consolidation worksheet for 20X4 in good form.
b.Prepare a consolidated balance sheet, income statement, and retained earnings statement for 20X4.
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