Modified Equity Method
On December 31, 20X7, Prime Company recorded the following entry on its books to adjust its investment in Lane Company from the fully adjusted equity method to the modified equity method:
Income from Lane Company | 2,000 |
|
Investment in Lane Company Stock | 38,400 |
|
Retained Earnings |
| 40,400 |
Required
a.Adjust the data reported by Prime in the trial balance in Problem P7-33 for the effects of the adjusting entry presented above.
b.Prepare the journal entries that would have been recorded on Prime’s books during 20X7 if it had always used the fully adjusted equity method.
c.Prepare all eliminating entries needed to complete a consolidation worksheet as of December 31, 20X7, assuming Prime has used the fully adjusted equity method.
d.Complete a three-part consolidation worksheet as of December 31, 20X7.
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