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On January $01,2020,$ Pebble Company purchased a controlling interest in Rock Company for $$402,000.$ On

this date, Rock had total owners' equity of $$440,000.$ Any excess of cost over book value is due to goodwill.

Pebble accounts for its investment in Rock using the simple equity method.

On January $1,2022,$ Pebble held merchandise acquired from Rock for $$50,000.$ During $2022,$ Rock sold

merchandise to Pebble for $$120,000,$ of which Pebble holds $$30,000$ on December $31,2022.$ Rock's gross

profit on sales is $40\%.$ On December $31,2022,$ Pebble still owes Rock $$5,000$ for merchandise.

On December $31,2020,$ Pebble sold $$100,000$ par value of $11\%,10-$year bonds which resulted in an effective

interest rate of $10\%.$ The bonds pay interest semi$-$annually on June $30$ and December $31.$ Both companies

use the Effective Interest method to amortize any premium $/$ discount on the bonds.

On December $31,2021,$ Rock purchased $$50,000$ par value of the parent$$s bonds, paying a price equal to

par. The bonds are still held on December $31,2022.$

On December $31,2022,$ Pebble sold equipment with a cost of $$50,000$ and accumulated depreciation of

$$30,000$ to Rock for $$40,000.$ Rock will use the equipment beginning in $2023.$

Pebble and Rock had the following trial balances on December $31,2022$:

Balances Pebble Rock

Inventory, December $31$

$120,000$

$60,000$

Other Current Assets

$399,620$

$325,000$

Investment in Rock Company

$550,000$

Investment in Pebble Bonds

$50,000$

Land

$140,000$

$100,000$

Buildings & Equipment

$325,000$

$440,000$

Accumulated Depreciation

$(120,000)$

$(130,000)$

Current Liabilities

$(160,000)$

$(80,000)$

Bonds Payable, $10\%$

$(100,000)$

Premium on Bonds Payable

$(5,420)$

Other Long$-$Term Liabilities

$(200,000)$

$(140,000)$

Common Stock $-$ Pebble Co$.$

$(200,000)$

Other Paid$-$In Capital $-$ Pebble Co$.$

$(100,000)$

Retained Earnings $-$ Pebble Co$.$

$(489,200)$

Common Stock $-$ Rock Co$.$

$(100,000)$

Other Paid$-$In Capital $-$ Rock Co$.$

$(200,000)$

$2$

Balances Pebble Rock

Retained Earnings $-$ Rock Co$.$

$(250,000)$

Net Sales

$(590,000)$

$(520,000)$

Cost of Goods Sold

$355,000$

$310,000$

Operating Expenses

$114,426$

$115,500$

Interest Income

$(5,500)$

Interest Expense

$10,574$

Subsidiary Income

$(80,000)$

Gain on Sale of Equipment

$(20,000)$

Dividends Declared $-$ Pebble Co$.$

$50,000$

Dividends Declared $-$ Rock Co$.$

$25,000$

Total $00$

Required:

$(1)$ Calculate the percentage interest of Rock Company$$s voting common stock that was acquired by Pebble

Company on the date of acquisition.

$(2)$ Using TVM principles:

a$.$ Calculate how much Pebble Company received on December $31,2020$ for issuance of the bonds.

Round up to the nearest dollar.

b$.$ State how much Rock Company paid to purchase $50\%$ of the bonds on December $31,2020.$

c$.$ Prepare the bond amortization schedule for the issuer of the bonds for the three$-$year period

$2020$ to $2022.$ Round each figure to the nearest dollar.

$(3)$ Prepare the Eliminating and Adjusting Entries, the Schedules and Worksheet necessary to produce the

consolidated financial statements of Pebble Company and its Rock for the year ended December $31,$

$2022.$

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