Background

Po Corporation pays $270,000 for 90% of the outstanding voting stock of San Corporation
on Dec 31, 2016, when San Corporation's stockholders' equity consists of $200,000 capital
stock and $50,000 retained earnings. All the assets and liabilities of Snap Corporation are
stated at their fair values. Any excess will be allocated to goodwill (not amortized)

San sells inventory items to Po on a regular basis, and the intercompany transaction data
for 2019 are as follows:
Sales to Po in 2019
Selling price of inventories sold to Po (based on the cost)
Po's inventory at December 31, 2018 acquired from San
Po's inventory at December 31, 2019 acquired from San
Po's accounts payable to San, December 31, 2019

Preliminary Analysis
Investment Cost 270,000.00
Interest acquired by Prep Corporation 0.90
Implied total fair value of Snap Corporation 300,000.00
Book value (= Fair Value) of Snap Corporation 250,000.00
Excess of investment cost over fair value 50,000.00
Allocated to goodwill (not amortized) 50,000.00
-

The Journal Entries during 2019 by Po Corporation (Parent)

a. Cash 45,000.00
Investment in San Corporation
(90% of $50,000 dividend paid by San)

c. Investment in San Corporation 90,000.00

Income from San Corporation
(90% of $100,000 net income reported by San)

d. Investment in San Corporation 7,200.00

Income from San Corporation
(90% x 40/140 x $28,000 realized profit in beginning inventory)
e. Income from San Corporation 10,800.00
Investment in San Corporation
(90% x 40/140 x $42,000 unrealized profit in ending inventory)

Related Accounts

Income from San Corporation

10,800.00 90,000.00
7,200.00
10,800.00 97,200.00
86,400.00
 stock of San Corporation
onsists of $200,000 capital
of Snap Corporation are
l (not amortized)

ompany transaction data

560,000.00
140%
28,000.00
42,000.00
10,000.00

(200,000+50,000)

45,000.00

90,000.00

7,200.00
inventory)
 10,800.00
inventory)
 PO CORPORATION AND SUBSIDIARY
Financial Statements
For the Year Ended December 31, 2019

Parent
INCOME STATEMENT
Net sales 819,000.00
Income from San 86,400.00
Cost of sales (546,000.00)
Expenses (154,400.00)
Net Income 205,000.00

STATEMENT OF RETAINED EARNINGS

Retained Earnings - Po - 01/01 125,000.00
Retained Earnings - San - 01/01
Add: Net Income 205,000.00
Deduct: Dividends (100,000.00)
Retained Earnings - 12/31 230,000.00

BALANCE SHEET
Cash 75,800.00
Inventories 42,000.00
Other Current Assets 60,000.00
Plant and Equipment 300,000.00
Investment in San 322,200.00
800,000.00
Current Liabilities 170,000.00
Capital Stock 400,000.00
Retained Earnings 230,000.00
800,000.00
DIARY

19

Subsidiary
90%

560,000.00

(400,000.00)
(60,000.00)
100,000.00

70,000.00
100,000.00
(50,000.00)
120,000.00

50,000.00
80,000.00
20,000.00
300,000.00

450,000.00
130,000.00
200,000.00
120,000.00
450,000.00
 PO CORPORATION AND SUBSIDIARY
Consolidation Working Papers
For the Year Ended December 31, 2019

Subsidiary Adjustments and Eliminati

Parent 80% Debits
INCOME STATEMENT
Net sales 819,000.00 560,000.00
Income from San 86,400.00
Cost of sales (546,000.00) (400,000.00)

Expenses (154,400.00) (60,000.00)

Net Income 205,000.00 100,000.00

STATEMENT OF RETAINED EARNINGS

Retained Earnings - Po - 01/01 125,000.00
Retained Earnings - San - 01/01 70,000.00
Add: Net Income 205,000.00 100,000.00
Deduct: Dividends - Po (100,000.00)
Deduct: Dividends - San (50,000.00)

Retained Earnings - 12/31 230,000.00 120,000.00

BALANCE SHEET
Cash 75,800.00 50,000.00
Inventories 42,000.00 80,000.00
Other Current Assets 60,000.00 20,000.00
Plant and Equipment 300,000.00 300,000.00
Investment in San 322,200.00

800,000.00 450,000.00
Current Liabilities 170,000.00 130,000.00
Capital Stock 400,000.00 200,000.00
Retained Earnings 230,000.00 120,000.00

800,000.00 450,000.00
ND SUBSIDIARY
king Papers
ember 31, 2019

Adjustments and Eliminations Consolidated

Debits Credits Statements

1,379,000.00
86,400.00
(946,000.00)

(214,400.00)
0.00

305,000.00

125,000.00
70,000.00
305,000.00
(100,000.00)
(50,000.00)

350,000.00

125,800.00
122,000.00
80,000.00
600,000.00
322,200.00

0.00
1,250,000.00
300,000.00
600,000.00
350,000.00

0.00

0.00 0.00 1,250,000.00

 PO CORPORATION AND SUBSIDIARY
Consolidation Working Papers
For the Year Ended December 31, 2019

Subsidiary Adjustments and Eliminati

Parent 80% Debits
INCOME STATEMENT
Net sales 819,000.00 560,000.00 a.
Income from San 86,400.00
Cost of sales (546,000.00) (400,000.00) c.

Expenses (154,400.00) (60,000.00)

Net Income 205,000.00 100,000.00

STATEMENT OF RETAINED EARNINGS

Retained Earnings - Po - 01/01 125,000.00
Retained Earnings - San - 01/01 70,000.00
Add: Net Income 205,000.00 100,000.00
Deduct: Dividends - Po (100,000.00)
Deduct: Dividends - San (50,000.00)

Retained Earnings - 12/31 230,000.00 120,000.00

BALANCE SHEET
Cash 75,800.00 50,000.00
Inventories 42,000.00 80,000.00
Other Current Assets 60,000.00 20,000.00
Plant and Equipment 300,000.00 300,000.00
Investment in San 322,200.00 b.

800,000.00 450,000.00
Current Liabilities 170,000.00 130,000.00
Capital Stock 400,000.00 200,000.00
Retained Earnings 230,000.00 120,000.00

Non-controlling Interest b.

800,000.00 450,000.00
ND SUBSIDIARY
king Papers
ember 31, 2019

Adjustments and Eliminations Consolidated

Debits Credits Statements

560,000.00 819,000.00
86,400.00
12,000.00 a. 560,000.00 (390,000.00)
b. 8,000.00
(214,400.00)
0.00

301,000.00

125,000.00
70,000.00
301,000.00
(100,000.00)
(50,000.00)

346,000.00

125,800.00
c. 12,000.00 110,000.00
80,000.00
600,000.00
7,200.00 329,400.00

0.00
1,245,200.00
300,000.00
600,000.00
346,000.00

800.00 (800.00)

580,000.00 580,000.00 1,245,200.00

 PO CORPORATION AND SUBSIDIARY
Consolidation Working Papers
For the Year Ended December 31, 2019

Subsidiary Adjustments and Eliminati

Parent 80% Debits
INCOME STATEMENT
Net sales 819,000.00 560,000.00 a.
Income from San 86,400.00 d.
Cost of sales (546,000.00) (400,000.00) c.

Expenses (154,400.00) (60,000.00)

Non-controlling Interest Share f.
(10% x (100,000+8,000-12,000))
Net Income 205,000.00 100,000.00

STATEMENT OF RETAINED EARNINGS

Retained Earnings - Po - 01/01 125,000.00
Retained Earnings - San - 01/01 70,000.00 e.
Add: Net Income 205,000.00 100,000.00
Deduct: Dividends - Po (100,000.00)
Deduct: Dividends - San (50,000.00)

Retained Earnings - 12/31 230,000.00 120,000.00

BALANCE SHEET
Cash 75,800.00 50,000.00
Inventories 42,000.00 80,000.00
Other Current Assets 60,000.00 20,000.00
Plant and Equipment 300,000.00 300,000.00
Investment in San 322,200.00 b.

Goodwill e.
800,000.00 450,000.00
Current Liabilities 170,000.00 130,000.00 g.
Capital Stock 400,000.00 200,000.00 e.
Retained Earnings 230,000.00 120,000.00

Non-controlling Interest b.

800,000.00 450,000.00
ND SUBSIDIARY
king Papers
ember 31, 2019

Adjustments and Eliminations Consolidated

Debits Credits Statements

560,000.00 819,000.00
86,400.00 0.00
12,000.00 a. 560,000.00 (390,000.00)
b. 8,000.00
(214,400.00)
9,600.00 (9,600.00)

205,000.00

125,000.00
70,000.00 0.00
205,000.00
(100,000.00)
d. 45,000.00 0.00
f. 5,000.00
230,000.00

125,800.00
c. 12,000.00 110,000.00
g. 10,000.00 70,000.00
600,000.00
7,200.00 d. 41,400.00 0.00
e. 288,000.00
50,000.00 50,000.00
955,800.00
10,000.00 290,000.00
200,000.00 400,000.00
230,000.00

800.00 e. 32,000.00 35,800.00

f. 4,600.00

1,006,000.00 1,006,000.00 955,800.00