Prange Company

On January 1, 20X1, Prange Company acquired 80% of the common stock of Seaman Company for $500,000. On this date Seaman had total owners’ equity of $400,000. Any excess of cost over book value is attributable to patent, which is to be amortized over 20 years.
During 20X1 and 20X2, Prange has appropriately accounted for its investment in Seaman using the simple equity method.
On January 1, 20X2, Prange held merchandise acquired from Seaman for $30,000. During 20X2, Seaman sold merchandise to Prange for $100,000, of which $20,000 is held by Prange on December 31, 20X2. Seaman’s gross profit on all sales is 40%.
On December 31, 20X2, Prange still owes Seaman $20,000 for merchandise acquired in December.
Required:
Complete the Figure 4-2 worksheet for consolidated financial statements for the year ended December 31, 20X2.
Figure 4-2
Trial Balance Eliminations and
Prange Seaman Totals Adjustments
Account Titles Company Company Debit
Debit Credit
Inventory, December 31 100,000 105,000 205,000
Other Current Assets 285,000 325,000 610,000
Investment in Sub. Company 588,000 588,000
Land 140,000 80,000 220,000
Buildings and Equipment 315,000 340,000 655,000
Accumulated Depreciation (252,000) (130,000) (382,000)
Patent 60,000 60,000
Current Liabilities (150,000) (70,000) (220,000)
Bonds Payable (100,000) (100,000)
Other Long-Term Liabilities (200,000) (40,000) (240,000)
Common Stock—P Co. (200,000) (200,000)
Other Paid in Capital—P Co. (100,000) (100,000)
Retained Earnings—P Co. (474,000) (474,000)
Common Stock—S Co. (150,000) (150,000)
Other Paid in Capital—S Co. (100,000) (100,000)
Retained Earnings—S Co. (200,000) (200,000)
Net Sales (600,000) (380,000) (980,000)
Cost of Goods Sold 360,000 228,000 588,000
Operating Expenses 140,000 62,000 202,000
Subsidiary Income (72,000) (72,000)
Dividends Declared—P Co. 60,000 60,000
Dividends Declared—S Co. 30,000 30,000
Internally Generated Net Income 100,000 90,000

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