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Sale of Subsidiary Share Penn Corporation purchased 80 percent ownership of ENC Company on January 1, 20X2 at underlying book value At that date the fair value of the

Sale of Subsidiary Share Penn Corporation purchased 80 percent ownership of ENC Company on January 1, 20X2 at underlying book value At that date the fair value of the

Sale of Subsidiary Share

Penn Corporation purchased 80 percent ownership of ENC Company on January 1, 20X2, at underlying book value. At that date, the fair value of the noncontrolling interest was equal to 20 percent of the book value of ENC. On January 1, 20X4, Penn sold 2,000 shares of ENC’s stock for $60,000 to American School Products and recorded a $10,000 gain. Trial balances for the companies on December 31, 20X4, contain the following data:

 

Penn Corporation

ENC Company

 

Debit

Credit

Debit

Credit

Cash

$ 30,000

 

$ 35,000

 

Accounts Receivable

70,000

 

50,000

 

Inventory

120,000

 

100,000

 

Buildings & Equipment

650,000

 

230,000

 

Investment in ENC Company

162,000

 

 

 

Cost of Goods Sold

210,000

 

100,000

 

Depreciation Expense

20,000

 

15,000

 

Other Expenses

21,000

 

25,000

 

Dividends Declared

15,000

 

10,000

 

Accumulated Depreciation

 

$ 170,000

 

$ 95,000

Accounts Payable

 

50,000

 

20,000

Bonds Payable

 

200,000

 

30,000

Common Stock ($10 par)

 

200,000

 

100,000

Additional Paid-In Capital

 

50,000

 

20,000

Retained Earnings

 

320,000

 

130,000

Sales

 

280,000

 

170,000

Gain on Sale of ENC Company Stock

 

10,000

 

 

Income from ENC

 

18,000

 

 

Total

$1,298,000

$1,298,000

$565,000

$565,000

ENC’s net income was earned evenly throughout the year. Both companies declared and paid their dividends on December 31, 20X4. Penn uses the basic equity method in accounting for its investment in ENC.

Required

a. Prepare the elimination entries needed to complete a full consolidation worksheet for 20X4.

b. Prepare a consolidation worksheet for 20X4.

Tripti 09-Jul-2020

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