Power Corporation acquired 75 percent of Best Company’s ownership on January 1, 20X8, for $96,000. At that date, the fair value of Best’s buildings and equipment was $20,000 more than book value. Buildings and equipment are depreciated on a 10-year basis. Although goodwill is not amortized, the management of Power concluded at December 31, 20X8, that goodwill involved in its purchase of Best shares had been impaired and the correct carrying value was $2,500. No additional impairment occurred
in 20X9. Trial balance data for Power and Best on December 31, 20X9, are as follows:
Power Corporation Best Company
Item Debit Credit Debit Credit
Cash 68,500 32,000
Accounts Receivable 85,000 14,000
Inventory 97,000 24,000
Land 50,000 25,000
Buildings and Equipment 350,000 150,000
Investment in Best Co. Stock 111,000
Cost of Goods Sold 145,000 114,000
Wage Expense 35,000 20,000
Depreciation Expense 25,000 10,000
Interest Expense 12,000 4,000
Other Expenses 23,000 16,000
Dividends Declared 30,000 20,000
Accumulated Depreciation 170,000 50,000
Acounts Payable 51,000 15,000
Wages Payable 14,000 6,000
Notes Payable 150,000 50,000
Common Stock 200,000 60,000
Retained Earnings 131,000 48,000
Sales 290,000 200,000
Income From Subsidiary 25,500
1,031,500 1,031,500 429,000 429,000
a. Give all eliminating entries needed to prepare a three-part consolidation workpaper as of December 31, 20X9.
b. Prepare a three-part consolidation workpaper for 20X9 in good form.
c. Prepare a consolidated balance sheet, income statement, and retained earnings statement for 20X9.
