Pheasant Corporation owns 80% of Sal Corporation's outstanding common stock that was purchased at book value equal to fair value on January 1, 2005.
Additional information:
1.Pheasant sold inventory items that cost $3,000 to Sal during 2012 for $6,000.One-half of this merchandise was inventoried by Sal at year-end.At December 31, 2012, Sal owed Pheasant $2,000 on account from the inventory sales.No other intercompany sales of inventory have occurred since Pheasant acquired its interest in Sal.
2.Pheasant sold equipment with a book value of $5,000 and a 5-year useful life to Sal for $10,000 on December 31, 2010.The equipment remains in use by Sal and is depreciated by the straight-line method.The equipment has no salvage value.
3.On January 2, 2012, Sal paid $10,800 for $10,000 par value of Pheasant's 10-year, 10% bonds.These bonds were originally sold at par value, and have interest payment dates of January 1 and July 1, and mature on January 1, 2016.Straight-line amortization has been applied by Sal to the Pheasant bond investment.
4.Pheasant uses the equity method in accounting for its investment in Sal.
Required:
Complete the working papers to consolidate the financial statements of Pheasant Corporation and Sal for the year ended December 31, 2012.

Question

Quizplus · Accepted Answer

The Answer of Pheasant Corporation owns 80% of Sal Corporation's outstanding common stock that was purchased at book value equal to fair value on January 1, 2005.
Additional information:
1.Pheasant sold inventory items that cost $3,000 to Sal during 2012 for $6,000.One-half of this merchandise was inventoried by Sal at year-end.At December 31, 2012, Sal owed Pheasant $2,000 on account from the inventory sales.No other intercompany sales of inventory have occurred since Pheasant acquired its interest in Sal.
2.Pheasant sold equipment with a book value of $5,000 and a 5-year useful life to Sal for $10,000 on December 31, 2010.The equipment remains in use by Sal and is depreciated by the straight-line method.The equipment has no salvage value.
3.On January 2, 2012, Sal paid $10,800 for $10,000 par value of Pheasant's 10-year, 10% bonds.These bonds were originally sold at par value, and have interest payment dates of January 1 and July 1, and mature on January 1, 2016.Straight-line amortization has been applied by Sal to the Pheasant bond investment.
4.Pheasant uses the equity method in accounting for its investment in Sal.
Required:
Complete the working papers to consolidate the financial statements of Pheasant Corporation and Sal for the year ended December 31, 2012.

Pheasant Corporation Owns 80% of Sal Corporation's Outstanding Common Stock