Prepare A Consolidated Worksheet For Picante And Salsa As Of December 31 2011

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Prepare the worksheet necessary to produce the consolidated financial statements of Silvio Corporation and its subsidiary for the year ended December 31, 20X3. Include the determination and distribution of excess schedule and the income distribution schedules.

Problem 4-6 (LO 3) 80%, equity, fixed asset sales by subsidiary and parent. On

September 1, 20X1, Parcel Corporation purchased 80% of the outstanding common stock of Sack Corporation for $152,000. On that date, Sack's net book values equaled fair values, and there was no excess of cost or book value resulting from the purchase. Parcel has been maintaining its investment under the simple equity method.

Over the next 3 years, the intercompany transactions between the companies were as follows:

a. On September 1, 20X1, Sack sold its 4-year-old delivery truck to Parcel for $14,000 in cash. At that time, Sack had depreciated the truck, which had cost $15,000, to its $5,000 salvage value. Parcel estimated on the date of the sale that the asset had a remaining useful life of 3 years and no salvage value.

b. On September 1, 20X2, Parcel sold equipment to Sack for $103,000. Parcel originally paid $80,000 for the equipment and planned to depreciate it over 20 years, assuming no salvage value. However, Parcel had the property for only 10 years and carried it at a net book value of $40,000 on the sale date. Sack will use the equipment for 10 years, at which time Sack expects no salvage value.

Both companies use straight-line depreciation for all assets.

Trial balances of Parcel Corporation and Sack Corporation as of the August 31, 20X3 year-end are as follows:

Parcel Corporation

Sack Corporation

Cash 120,000

Accounts Receivable (net) 115,000

Notes Receivable

Inventory 175,000

Investment in Sack Corporation 217,440

Plant and Equipment 990,700

Accumulated Depreciation (170,000)

Other Assets 28,000

Accounts Payable (80,000)

Notes Payable (25,000)

Paid-In Capital in Excess of Par (110,000)

Retained Earnings, Sept. 1, 20X2 (498,850)

Cost of Goods Sold 598,000

Selling and General Expenses 108,000

Subsidiary Income (23,040)

Interest Income

Interest Expense 37,750

Gain on Sale of Equipment (63,000)

Dividends Declared 90,000

Totals 0

50,000 18,000 10,000 34,000

(70,000) (62,000) (118,000) (240,000) 132,000 80,000

7,000 0


Prepare the worksheet necessary to produce the consolidated financial statements of Parcel Corporation and its subsidiary for the year ended August 31, 20X3. Include the income distribution schedules.


Use the following information for Problems 4-7 and 4-8:

On January 1, 20X1, Polka Company acquired Salsa Company. Polka paid $440,000 for 80% of Salsa's common stock. On the date of acquisition, Salsa had the following balance sheet:

Salsa Company Balance Sheet January 1, 20X1


Accounts receivable $ 60,000

Inventory 40,000

Land 60,000

Buildings 200,000

Accumulated depreciation . . . (50,000)

Equipment 72,000

Accumulated depreciation . . . (30,000)

Total assets $352,000

Liabilities and Equity

Accounts payable $ 40,000

Bonds payable 100,000

Common stock 10,000

Paid-in capital in excess of par 90,000

Retained earnings 112,000

Total liabilities and equity . . $352,000

Buildings, which have a 20-year life, are understated by $100,000. Equipment, which has a 5-year life, is understated by $38,000. Any remaining excess is considered goodwill. Polka uses the simple equity method to account for its investment in Salsa. Polka and Salsa had the following trial balances on December 31, 20X2:

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