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Problem 4-6 On January 1, 2011, Plank Company purchased 80% of the outstanding capital stock of...

Problem 4-6

On January 1, 2011, Plank Company purchased 80% of the outstanding capital stock of Scoba Company for $52,300. At that time, Scoba’s stockholders’ equity consisted of capital stock, $54,300; other contributed capital, $5,000; and retained earnings, $4,100. On December 31, 2015, the two companies’ trial balances were as follows:

Plank Scoba
Cash $41,800 $22,000
Accounts Receivable 21,000 17,100
Inventory 14,900 8,100
Investment in Scoba Company 68,940 —0—
Land 52,800 47,000
Dividends Declared 9,900 7,760
Cost of Goods Sold 85,400 19,900
Other Expense 10,200 12,100
$304,940 $133,960
Accounts Payable $ 11,900 $ 6,000
Other Liabilities 4,900 4,000
Common Stock 101,500 54,300
Other Contributed Capital 19,600 5,000
Retained Earnings, 1/1 49,400 15,200
Sales 103,672 49,460
Equity in Subsidiary Income 13,968 —0—
$304,940 $133,960


The accounts payable of Scoba Company include $2,900 payable to Plank Company.

(b) Prepare a consolidated statements workpaper at December 31, 2015. Any difference between book value and the value implied by the purchase price relates to subsidiary land. (List items that increase retained earnings first.)

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Answer #1
Cash $41,800 $22,000
Accounts Receivable 21,000 17,100
Inventory 14,900 8,100
Investment in Scoba Company 68,940 —0—
Land 52,800 47,000
Dividends Declared 9,900 7,760
Cost of Goods Sold 85,400 19,900
Other Expense 10,200 12,100
$304,940 $133,960
Accounts Payable $ 11,900 $ 6,000
Other Liabilities 4,900 4,000
Common Stock 101,500 54,300
Other Contributed Capital 19,600 5,000
Retained Earnings, 1/1 49,400 15,200
Sales 103,672 49,460
Equity in Subsidiary Income 13,968 —0—
$304,940 $133,960


The accounts payable of Scoba Company include $2,900 payable to Plank Company.

(b) Prepare a consolidated statements workpaper at December 31, 2015. Any difference between book value and the value implied by the purchase price relates to subsidiary land. (List items that increase retained earnings first.)

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