Reference no: EM132616249
On January 1, 2018, Panorama Corporation acquired a 75 percent interest in Scan Corporation for $1,800,000, when Scan's equity consisted of $900,000 capital stock and $300,000 retained earnings. The fair values of Scan's assets and liabilities were equal to book values on this date. Panorama uses the equity method of accounting for Scan.
During 2018, Panorama sold inventory items to Scan for $480,000, and at December 31, 2018, Scan's inventory included items on which there were $60,000 unrealized profits. During 2019, Panorama sold inventory items to Scan for $780,000, and at December 31, 2019, Scan's inventory included items on which there were $120,000 unrealized profits.
On December 31, 2019, Scan owed Panorama $90,000 on account for merchandise purchases. The financial statements of Panorama and Scan Corporations at and for the year ended December 31, 2019, are summarized as follows (in thousands):
Panorama Scan
INCOME STATEMENT
Sales $3,600 $ 2,400
Income from Scan 615
Cost of Sales (1,620) (1,260)
Operating expenses (870) (240)
Net income 1,725 900
Retained Earnings 1/1 1,095 540
Less: Dividends (900) (300)
Retained Earnings 12/31 1,920 1,140
BALANCE SHEET
Cash 510 180
Accounts Receivables 990 600
Dividends Receivable 90
Inventories 360 480
Land 480 300
Buildings-net 1,380 600
Equipment-net 1,200 840
Investment in Scan 2,310
Total assets 7,320 3,000
LIAB. £ EQUITY
Accounts Payable 1,350 600
Dividends Payable 420 120
Other Liabilities 930 240
Capital Stock, $10 par 2,700 900
Ret. Earnings 1,920 1,140
LIAB. & EQUITY $7,320 $3,000
Required:
Problem 1: all elimination entries in 2019 (Including the entries not affecting the consolidated Income statement). Show all your calculations.
Problem 2: a workpaper for consolidated income statement only, for the year ended December 31, 2019.