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Question 1 - Complete equity with downstream sales

Pruitt Corporation owns 90% of the common stock of Sedbrook Company. The stock was purchased for $540,000 on January 1, 2009, when Sedbrook Company's retained earnings were $100,000. Preclosing trial balance for the two companies at December 31, 2013 are presented here: (see attached templates).

The January 1, 2013 inventory of Sedbrook Company includes $30,000 of profit recorded by Pruitt Corporation on 2012 sales. During 2013, Pruitt Corporation made intercompany sales of $200,000 with a markup of 25% on cost. The ending inventory of Sedbrook Company includes goods purchased in 2013 from Pruitt for $50,000. Pruitt Corporation uses the complete equity method to record its investment in Sedbrook Company.

Required:

A. Prepare the consolidated statements workpaper for the year ended December 31, 2013.

B. Calculate consolidated retained earnings on December 31, 2013, using the analytical or t-account approach.

Question 2 - Paque Corporation owns 90% of the common stock of Segal Company. The stock was purchased for $810,000 on January 1, 2009, when Segal Company's retained earnings were $150,000.

Financial data for 2013 are presented here (see attached templates)

The January 1, 2013 inventory of Paque Corporation includes $45,000 of profit recorded by Segal Company on 2012 sales. During 2013, Segal Company made intercompany sales of $300,000 with a markup of 20% of selling price. The ending inventory of Paque Corporation includes goods purchased in 2013 from Segal Company for $75,000. Paque Corporation uses the complete equity method to record its investment in Segal Company.

Required:

A. Prepare the consolidated statements workpaper for the year ended December 31, 2013.

B. Calculate consolidated retained earnings on December 31, 2013, using the analystical or t-account approach."

You only need to answer 6-16 and 6-17 - disregard the other problems within the template.

Attachment:- Templates.rar

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M92584594
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