85. The adjusted, preclosing trial balances of Pie Company and Soup Company on December 31, Year 2, appear below.
$ 4,000
$ 1,000
Accounts Receivable
Merchandise Inventory
10,000
10,000
Investment in Soup Company
9,000
—
Land
l,000
2,000
Buildings and Equipment, net
5,000
Accounts Payable
$17,500
$12,500
Bonds Payable
5,000
4,000
Common Stock
2,500
1,000
Additional Paid-in Capital
1,000
2,500
Retained Earnings, January 1
10,500
2,000
Sales
35,000
25,000
Equity in Earnings of Soup Company
5,000
—
Cost of Goods Sold
25,000
17,500
Selling and Administrative Expenses
5,000
2,500
Dividends Declared
_______
Totals
$76,500
$76,500
$47,000
$47,000
Parent Company owns 100 percent of the common stock of Soup Company. It acquired the shares on January 2, Year 1, for an amount equal to the book value of Soup Company’s underlying net assets. On December 31, Year 2, Soup Company owes Pie Company $1,100 arising from short-term working capital loans.Required:Prepare in journal entry form the elimination entries required on December 31, Year 2, to prepare a consolidated financial statement for Pie Company and Soup Company. Note that neither a formal work sheet nor formal financial statements are required.
86. Piu Co. owns 100% of Xu Co. Piu has owned Xu since Xu was incorporated. At December 31, $15,000 of Xu’s accounts receivable represent amounts payable by Piu. $10,000 of Piu’s accounts receivable represent amounts payable by Xu. During the current year, Xu sold $10,000 in merchandise to Piu (at cost its cost of $10,000). Piu has sold all the merchandise purchased from Xu.
CONDENSED BALANCE SHEETSAs of December 31
Accounts receivable
$ 60,000
$ 40,000
Investment in Xu (equity)
130,000
–
Other assets
Total assets
Accounts payable
$ 50,000
$ 20,000
Other liabilities
640,000
90,000
Common stock
100,000
150,000
Retained earnings
Total liabilities and equity
CONDENSED INCOME STATEMENTfor Current Year
Sales
$300,000
$ 90,000
Equity in earnings of Xu
Total revenues
Cost of goods sold
$160,000
60,000
Depreciation
50,000
20,000
Other expenses
20,000
20,000
Tax expense
Total expenses
Net income
Required:Prepare the appropriate elimination entries necessary to prepare a consolidated balance sheet and income statement.
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