Reference no: EM132784046

Question - On January 1, 2021, Sledge had common stock of $180,000 and retained earnings of $320,000. During that year, Sledge reported sales of $190,000, cost of goods sold of $100,000, and operating expenses of $46,000.

On January 1, 2019, Percy, Inc., acquired 90 percent of Sledge's outstanding voting stock. At that date, $66,000 of the acquisition-date fair value was assigned to unrecorded contracts (with a 20-year life) and $26,000 to an undervalued building (with a 10-year remaining life).

In 2020, Sledge sold inventory costing $14,700 to Percy for $21,000. Of this merchandise, Percy continued to hold $6,000 at year-end. During 2021, Sledge transferred inventory costing $13,000 to Percy for $26,000. Percy still held half of these items at year-end.

On January 1, 2020, Percy sold equipment to Sledge for $15,000. This asset originally cost $22,000 but had a January 1, 2020, book value of $10,200. At the time of transfer, the equipment's remaining life was estimated to be five years.

Percy has properly applied the equity method to the investment in Sledge.

Required - Prepare worksheet entries to consolidate these two companies as of December 31, 2021.