Reference no: EM132615045
Question - Pizza Corporation acquired 80 percent ownership of Slice Products Company on January 1, 20X1, for $143,000. On that date, the fair value of the noncontrolling interest was $35,750, and Slice reported retained earnings of $42,000 and had $91,000 of common stock outstanding. Pizza has used the equity method in accounting for its investment in Slice.
Trial balance data for the two companies on December 31, 20X5, are as follows:
Pizza Corporation Slice Products Company
Item Debit Credit
Cash & Receivables $89,000 $80,000
Inventory 261,000 102,000
Land 82,000 82,000
Buildings & Equipment 502,000 154,000
Investment in Slice Products Company 173,340
Cost of Goods Sold 110,000 42,000
Depreciation Expense 24,000 14,000
Inventory Losses 14,000 6,000
Dividends Declared 43,000 17,200
Accumulated Depreciation $205,000 $98,000
Accounts Payable 59,000 20,000
Notes Payable 201,800 106,200
Common Stock 295,000 91,000
Retained Earnings 309,000 81,000
Sales 201,000 101,000
Income from Slice Products Company 27,540
Additional Information On the date of combination, the fair value of Slice's depreciable assets was $45,750 more than book value. The accumulated depreciation on these assets was $10,000 on the acquisition date. The differential assigned to depreciable assets should be written off over the following 10-year period.
1. There was $14,000 of intercorporate receivables and payables at the end of 20X5.
Required -
a. Prepare the journal entries that Pizza recorded during 20X5 related to its investment in Slice
b. Prepare the consolidation entries needed to prepare consolidated statements for 20X5.
c. Prepare the three-part worksheet as of December 31, 20X5.