During 2018, Pavin begins to sell merchandise to Stabler. During that year, inventory costing $90,000 was transferred at a price of $120,000. All but $20,000 (at sales price) of these goods were resold to outside parties by year-end. Stabler still owes $43,000 for inventory shipped from Pavin during December.
The following financial figures are for the two companies for the year ending December 31, 2018. Dividends were both declared and paid during the current year.
Revenues $(770,000) $(525,000)
Cost of goods sold 465,000 250,000
Expenses 135,000 168,500
Interest expense—bonds 46,000 0
Interest income—bond investment 0 (17,500)
Loss on extinguishment of bonds 0 0
Equity in Stabler's income (124,000) 0
Net income $(248,000) $(124,000)
Retained earnings, 1/1/18 $(355,000) $(381,000)
Net income (248,000) (124,000)
Dividends paid 165,000 87,000
Retained earnings, 12/31/18 $(438,000) $(418,000)
Cash and receivables $227,000 $45,000
Inventory 185,000 97,000
Investment in Stabler 638,000 0
Investment in Pavin bonds 0 197,500
Land, buildings, and equipment (net) 255,000 551,000
Trademarks 0 0
Total assets $1,305,000 $890,500
Accounts payable $(158,000) $(232,500)
Bonds payable (400,000) (110,000)
Discount on bonds 10,000 0
Common stock (319,000) (130,000)
Retained earnings (above) (438,000) (418,000)
Total liabilities and stockholders' equity $(1,305,000) $(890,500)
Note: Credits are indicated by parentheses.
Prepare a worksheet to produce consolidated balances. (For accounts where multiple consolidation entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet. Amounts in the Debit and Credit columns should be entered as positive. Negative amounts for the Consolidated Totals column should be entered with a minus sign.)
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