P5-37 (Comprehensive Problem: Majority-Owned Subsidiary) Master Corporation acquired 80 percent ownership of Stanley Wood Products Company on January 1, 20X1, for $160,000. On that date, the fair value of the noncontrolling interest was $40,000, and Stanley reported retained earnings of $50,000 and had $100,000 of common stock outstanding. Master has used the equity method in accounting for its investment in Stanley.
Trial balance data for the two companies on December 31, 20X5, are as follows:
Item
Master
Corporation
Stanley Wood
Products Company
Debit Credit Debit Credit
Cash and Receivables $ 81,000 $ 65,000
Inventory 260,000 90,000
Land 80,000 80,000
Buildings and Equipment 500,000 150,000
Investment in Stanley Wood Products Stock 188,000
Cost of Goods Sold 120,000 50,000
Depreciation Expense 25,000 15,000
Inventory Losses 15,000 5,000
Dividends Declared 30,000 10,000
Accumulated Depreciation $ 205,000 $105,000
Accounts Payable 60,000 20,000
Notes Payable 200,000 50,000
Common Stock 300,000 100,000
Retained Earnings 314,000 90,000
Sales 200,000 100,000
Income from Subsidiary 20,000
$1,299,000 $1,299,000 $465,000 $465,000
Additional Information
1. On the date of combination, the fair value of Stanley’s depreciable assets was $50,000 more than book value. The differential assigned to depreciable assets should be written off over the following 10-year period.
2. There was $10,000 of intercorporate receivables and payables at the end of 20X5.
Required:
1. Prepare all entries recorded by the parent co with respect to its investment in the sub for 20X5
2. Prepare all elimination entries for 20X5
3. Prepare a three-part worksheet as of December 31, 20X5
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