Question

Pizza Corporation acquired 80 percent ownership of Slice Products Company on January 1, 20X1, for $147,000. On that date, the fair value of the noncontrolling interest was $36,750, and Slice reported retained earnings of $41,000 and had $96,000 of common stock outstanding. Pizza has used the equity method in accounting for its investment in Slice.

Trial balance data for the two companies on December 31, 20X5, are as follows:
  

	Pizza Corporation						Slice Products Company
Item	Debit			Credit			Debit			Credit
Cash & Receivables	$	85,000					$	83,000
Inventory		263,000						94,000
Land		85,000						85,000
Buildings & Equipment		503,000						165,000
Investment in Slice Products Company		183,340
Cost of Goods Sold		114,000						41,000
Depreciation Expense		22,000						12,000
Inventory Losses		12,000						6,000
Dividends Declared		47,000						25,200
Accumulated Depreciation				$	203,000					$	84,000
Accounts Payable					40,000						19,000
Notes Payable					225,880						118,200
Common Stock					298,000						96,000
Retained Earnings					312,000						86,000
Sales					200,000						108,000
Income from Slice Products Company					35,460
	$	1,314,340		$	1,314,340		$	511,200		$	511,200

Additional Information

1. On the date of combination, the fair value of Slice's depreciable assets was $46,750 more than book value. The accumulated depreciation on these assets was $10,000 on the acquisition date. The differential assigned to depreciable assets should be written off over the following 10-year period.
2. There was $15,000 of intercorporate receivables and payables at the end of 20X5.

Required:
a. Prepare all journal entries that Pizza recorded during 20X5 related to its investment in Slice.

b. Prepare all consolidation entries needed to prepare consolidated statements for 20X5.

c. Prepare a three-part worksheet as of December 31, 20X5.

Answer 1

a