Question

Parry Corporation acquired a 100% interest in Sent Company on January 1, 2011, paying $139,100. Financial statement data for the two companies for the year ended December 31, 2011 follow:

Income Statement		Parry		Sent
Sales		$478,800		$153,700
Cost of goods sold		285,700		120,600
Other expense		45,600		29,500
Dividend income		3,400		—0—
Retained Earnings Statement
Balance, 1/1		75,400		19,300
Net income		150,900		3,600
Dividends declared		17,500		3,400
Balance Sheet
Cash		84,400		29,300
Accounts receivable		76,200		56,300
Inventory		49,900		36,400
Investment in Sent Company		139,100		—0—
Land		4,000		12,000
Accounts payable		27,300		14,200
Common stock		117,500		100,300
Retained earnings		208,800		19,500

(b) Prepare a workpaper for the preparation of consolidated financial statements on December 31, 2011. Any difference between the book value of equity acquired and the value implied by the purchase price relates to subsidiary land. (List items that increase retained earnings first.)

Answer 1

List of items that increases retained earnings
1	Profit of the company
2	Synergy gain
3	Reduction in dividend distribution

.

Parry Corporation
Profit and Loss Account
As on 31.12.2011
Particulars	Amount	Particulars	Amount
To Cost of Goods Sold	406300.00	By Sales	632500.00
To Gross profit	226200.00
	632500.00		632500.00
To Other Expenses	75100.00	By Gross Profit	226200.00
		By Dividend Income	3400.00
To Net Profit	154500.00
	229600.00		229600.00
Balance Sheet
As on 31.12.2011
Liability	Amount	Assets	Amount
Retained Earnings	208800.00	Cash	113700.00
Common Stock	117500.00	Accounts receivable	132500.00
Accounts payable	41500.00	Inventories	86300.00
		Land	16000.00
		Subsidiary land	19300
	367800.00		367800.00