Advanced Accounting: Unit 3 - Extra Problem 1. Following are trial balances of P and S Company

Advanced Accounting
Unit 3 - Extra Problem
1. Following are trial balances of P and S Company as of December 31, 200X.
(Prior to the payment of dividends and recording S income using the equity method of accounting).
P Company S Company
Cash 607,000 73,000
Inventories 138,000 40,000
Other Assets 60,000
Investment in S 345,000
Plant Assets 330,000 160,000
Current Liabilities (120,000) (100,000)
Common Stock, $5 par value (100,000)
Common Stock, $10 par value (40,000)
Additional Paid in Capital (200,000) (20,000)
Retained Earnings (620,000) (60,000)
Sales (860,000) (120,000)
Cost of Goods Sold 300,000 42,000
Operating Expenses 120,000 25,000

Other information:
Differences between identifiable net assets of S Company on THE DATE OF THE ACQUISITION of S Company by P Company were:
Fair Value Book Value Difference
Plant 250,000 140,000 110,000
On January 1, 200X P Co. purchased S Co. for $345,000. Goodwill created on date of purchase was $115,000.
On December 31, 200X S paid $20,000 in dividends.

1. Show journal entries for the payment of dividends by S and P's recording of S's net income using the equity method of accounting.
2. Prepare consolidation worksheet.
3. Prepare consolidated financial statements for the year ending December 31, 200X.
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