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Question 6 Also think about how the adjustment will change if this was an UPSTREAM sale. Hint: You would need to debit NCI when doing the beginning inventory adjustment. PROBLEM 6-5 Intercompany Downstream Sales, Cost Method LO 6 Pruitt Corporation owns 90% of the common stock of Sedbrook Company. The stock was purchased for $625,500 on January 1, 2017, when Sedbrook Company's retained earnings were $95,000. Preclosing trial balances for the two companies at December 31, 2021, are presented here: Pruitt Corporation Sedbrook Company Cash $ 90,800 $ 96,000 Accounts Receivable (net) 243,300 135,000 Inventory 1/1 165,000 132,000 Investment in Sedbrook Co. 625,500 Other Assets 550,000 480,000 Dividends Declared 110,000 35,000 Purchases 935,000 420,000 Other Expenses 198,000 165,000 Total $2,917,600 $1,463,000 Accounts Payable $ 77,000 S 36,000 Other Liabilities 120,700 47,000 Common Stock 880,000 600,000 Retained Earnings (1/1) 598,400 144,000 Sales 1,210,000 636,000 Dividend Income 31,500 Total $2,917,600 $1,463,000 Ending Inventory $ 220,000 $ 144,000 The January 1, 2021, inventory of Sedbrook Company includes $25,000 of profit recorded by Pruitt Corporation on 2020 sales. During 2021, Pruitt Corporation made intercompany sales of $250,000 with a markup of 20% on cost. The ending inventory of Sedbrook Company includes goods purchased in 2021 from Pruitt for $60,000. Required: 1. Prepare the consolidated statements workpaper for the year ended December 31, 2021. 2. Calculate consolidated retained earnings on December 31, 2021, using the analytical or t-account approach. Question 6 Also think about how the adjustment will change if this was an UPSTREAM sale. Hint: You would need to debit NCI when doing the beginning inventory adjustment. PROBLEM 6-5 Intercompany Downstream Sales, Cost Method LO 6 Pruitt Corporation owns 90% of the common stock of Sedbrook Company. The stock was purchased for $625,500 on January 1, 2017, when Sedbrook Company's retained earnings were $95,000. Preclosing trial balances for the two companies at December 31, 2021, are presented here: Pruitt Corporation Sedbrook Company Cash $ 90,800 $ 96,000 Accounts Receivable (net) 243,300 135,000 Inventory 1/1 165,000 132,000 Investment in Sedbrook Co. 625,500 Other Assets 550,000 480,000 Dividends Declared 110,000 35,000 Purchases 935,000 420,000 Other Expenses 198,000 165,000 Total $2,917,600 $1,463,000 Accounts Payable $ 77,000 S 36,000 Other Liabilities 120,700 47,000 Common Stock 880,000 600,000 Retained Earnings (1/1) 598,400 144,000 Sales 1,210,000 636,000 Dividend Income 31,500 Total $2,917,600 $1,463,000 Ending Inventory $ 220,000 $ 144,000 The January 1, 2021, inventory of Sedbrook Company includes $25,000 of profit recorded by Pruitt Corporation on 2020 sales. During 2021, Pruitt Corporation made intercompany sales of $250,000 with a markup of 20% on cost. The ending inventory of Sedbrook Company includes goods purchased in 2021 from Pruitt for $60,000. Required: 1. Prepare the consolidated statements workpaper for the year ended December 31, 2021. 2. Calculate consolidated retained earnings on December 31, 2021, using the analytical or t-account approach

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