Proud Corporation acquired 80 percent of Spirited Company’svoting stock on January 1, 20X3, at underlying book value. The fairvalue of the noncontrolling interest was equal to 20 percent of thebook value of Spirited at that date. Assume that the accumulateddepreciation on depreciable assets was $44,000 on the acquisitiondate. Proud uses the equity method in accounting for its ownershipof Spirited. On December 31, 20X4, the trial balances of the twocompanies are as follows: Proud Corporation Spirited Company ItemDebit Credit Debit Credit Current Assets $ 248,000 $ 158,000Depreciable Assets 500,000 308,000 Investment in Spirited Company133,760 Depreciation Expense 21,000 11,000 Other Expenses 142,00082,000 Dividends Declared 50,000 27,800 Accumulated Depreciation $195,000 $ 66,000 Current Liabilities 66,000 46,000 Long-Term Debt113,960 186,800 Common Stock 182,000 87,000 Retained Earnings266,000 57,000 Sales 231,000 144,000 Income from Spirited Company40,800 $ 1,094,760 $ 1,094,760 $ 586,800 $ 586,800 Required: a.Prepare all consolidation entries required on December 31, 20X4, toprepare consolidated financial statements. (If no entry is requiredfor a transaction/event, select "No journal entry required" in thefirst account field.)
| No | Event | Accounts | Debit | Credit |
|---|
| A | 1 | Common stock | | |
| | Retained earnings | | |
| | Income from Spirited Company | | |
| | NCI in NI of Spirited Company | | |
| | Dividends declared | | |
| | Investment in Spirited Company | | |
| | NCI in NA of Spirited Company | | |
| | | | |
| B | 2 | Accumulated depreciation | | |
| | Depreciable assets | |
|
| | PROUD CORPORATION AND SUBSIDIARY | | Worksheet for Consolidated FinancialStatements | | December 31, 20X4 | | | | Consolidation Entries | | | Proud Corp. | Spirited Co. | DR | CR | Consolidated | | Income Statement | | | | | | | Sales | | | | | | | Less: Depreciation expense | | | | | | | Less: Other expenses | | | | | | | Income from Spirited Co. | | | | | | | Consolidated Net Income | $0 | $0 | $0 | $0 | $0 | | NCI in net income | | | | | | | Controlling Interest in Net Income | $0 | $0 | $0 | $0 | $0 | | Statement of Retained Earnings | | | | | | | Beginning balance | | | | | | | Net income | 0 | 0 | 0 | 0 | | | Less: Dividends declared | | | | | | | Ending Balance | $0 | $0 | $0 | $0 | $0 | | Balance Sheet | | | | | | | Current assets | | | | | | | Depreciable assets | | | | | | | Less: Accumulated depreciation | | | | | | | Investment in Spirited Co. | | | | | | | Total Assets | $0 | $0 | $0 | $0 | $0 | | Liabilities and Equity | | | | | | | Current liabilities | | | | | | | Long-term debt | | | | | | | Common stock | | | | | | | Retained earnings | | | | | | | NCI in NA of Spirited Co. | | | | | | | Total Liabilities andEquity | $0 | $0 | $0 | $0 | $0 |
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