Problem: Consolidation Workpaper - Year after Retirement
Bennett Corporation owns 60 percent of the stock of Stone Container Company, which it acquired a book value in 20X1. On December 31, 20X3, Bennett purchased $100,000 par value bonds of Stone Stone origianlly issued the bonds at par value. The bonds' coupon rate is 9 percent. Interest is paid semi-annually on June 30 and Decembert 31. Trial balance for the two companies on December 31, 20X4, are as follows:
|
|
|
|
|
Bennett |
|
|
Stone Container |
|
|
|
|
|
Corporation |
|
|
Company |
|
| Item |
|
|
|
|
Debit |
Credit |
|
Debit |
Credit |
| Cash |
|
|
|
|
$61,600 |
|
|
$20,000 |
|
| Accounts Receivabl |
|
|
|
100,000 |
|
|
80,000 |
|
| Inventory |
|
|
|
|
120,000 |
|
|
110,000 |
|
| Other Assets |
|
|
|
340,000 |
|
|
250,000 |
|
| Investment kin Stone Container Bonds |
|
106,000 |
|
|
|
|
| Investment in Stone Container Stock |
|
126,000 |
|
|
|
|
| Interest Expense |
|
|
|
20,000 |
|
|
18,000 |
|
| Other Expenses |
|
|
|
368,600 |
|
|
182,000 |
|
| Dividends Declared |
|
|
|
40,000 |
|
|
10,000 |
|
| Accounts Payable |
|
|
|
|
$80,000 |
|
|
$50,000 |
| Bonds Payable |
|
|
|
|
200,000 |
|
|
200,000 |
| Common Stock |
|
|
|
|
300,000 |
|
|
100,000 |
| Retained Earnings |
|
|
|
|
214,200 |
|
|
70,000 |
| Sales |
|
|
|
|
|
450,000 |
|
|
250,000 |
| Interest income |
|
|
|
|
8,000 |
|
|
|
| Income from Subsidiary |
|
|
|
30,000 |
|
|
|
| Total |
|
|
|
|
$1,282,200 |
1,282,200 |
|
$670,000 |
$670,000 |
All interest income recognized by Bennett is related to its investment in Stone bonds.
Problem:
a) Prepare a consolidation workpaper for 20X4 in good form.
b) Prepare a consolidated balance sheet, income statement, and retained earnings statement for 20X4.