Question: Prime Company holds 80 percent of Lane
Prime Company holds 80 percent of Lane Company’s stock, acquired on January 1, 20X2, for $160,000. On the acquisition date, the fair value of the noncontrolling interest was $40,000. Lane reported retained earnings of $50,000 and had $100,000 of common stock outstanding. Prime uses the fully adjusted equity method in accounting for its investment in Lane. Trial balance data for the two companies on December 31, 20X6, are as follows:
Additional Information:
At the date of combination, the book values and fair values of all separately identifiable assets and liabilities of Lane were the same. At December 31, 20X6, the management of Prime reviewed the amount attributed to goodwill as a result of its purchase of Lane stock and concluded an impairment loss of $18,000 should be recognized in 20X6 and shared proportionately between the controlling and noncontrolling shareholders.
On January 1, 20X5, Lane sold land that had cost $8,000 to Prime for $18,000.
On January 1, 20X6, Prime sold to Lane equipment that it had purchased for $75,000 on January 1, 20X1. The equipment has a total economic life of 15 years and was sold to Lane for $70,000. Both companies use straight-line depreciation.
There was $7,000 of intercompany receivables and payables on December 31, 20X6.
Required:
Give all consolidation entries needed to prepare a consolidation worksheet for 20X6.
Prepare a three-part worksheet for 20X6 in good form.
Prepare a consolidated balance sheet, income statement, and retained earnings statement for 20X6.
Transcribed Image Text:
Prime Company Lane Company Item Debit Credit Debit Credit $ 113,000 260,000 80,000 500,000 191,600 140,000 25,000 15,000 30,000 $ 35,000 90,000 80,000 150,000 Cash & Accounts Receivable Inventory Land Buildings & Equipment Investment in Lane Company Stock Cost of Goods Sold Depreciation & Amortization Other Expenses Dividends Declared Accumulated Depreciation Accounts Payable Bonds Payable Common Stock Retained Earnings Sales Gain on Sale of Equipment Income from Subsidiary 60,000 15,000 5,000 5,000 $ 205,000 60,000 200,000 300,000 322,000 240,000 20,000 7,600 $1,354,600 $ 45,000 20,000 50,000 100,000 95,000 130,000 Total $1,354,600 $440,000 $440,000
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