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Turkey Db (Cr) INCOME STATEMENT Sales (90,000) Income from Stuffing Db (Cr) (35,000) (1,330) Gain on Sale of Plucking Mach Loss on Feather Trimming...

Thomas, the President of Turkey Corporation (Turkey), a fabric material company, gobbled up Stuffing Company (Stuffing), a pillow manufacturer, when Turkey paid $26,800 cash for a 70% interest in Stuffing on January 1, 2009, when Stuffing's stockholders’ equity consisted of $15,000 Capital Stock and $9,000 of Retained Earnings.

Stuffing' s Assets and Liabilities were tailored specifically for this company and had total Fair Market Value differentials as follows at the time of acquisition:

Inventory was undervalued by $1,000 and were sold evenly over a two year period starting at the date of acquisition

Plant Assets with a 5 yr life were undervalued by $5,000

Trade Marks with a 20 yr life and $6,000 in value were not recorded

A mortgage with 10 yrs of remaining payments were overvalued by $1,000

Any remaing difference in Cost vs Book was attributed to Goodwill
 
Additional information:
  
1. Turkey sold feathers that cost $4,000 to Stuffing for $4,800 during 2009 and one-half of these feathers remained in stock by Stuffing on December 31, 2009.
 
 2. During 2010 Turkey Corporation sold feathers that cost $5,000 to Stuffing for $6,000 and 30% of these feathers remained unsold by Stuffing on December 31, 2010. Stuffing Company owed Turkey $700 on account at year-end 2010.
 
3. Turkey Corporation sold a plucking machine with a 5-year remaining life and a book value of $4,000 to Stuffing for $5,000 on January 1, 2010. Straight-line depreciation is used.

4. In 2010 Turkey shaved the price to $4,000 on a turkey feather trimming machine it bought from Stuffing when the trimming machine had a book value of $6,000 with a 10 year remaining life.
 
5. Turkey and Stuffing declared annual dividends of $10,000 and $3,000, respectively so that their shareholders could share in the gravy.
  
6. Separate financial statements for Turkey and Stuffing appear on partially completed consolidation working papers.
  
Required:

Please prepare all the required carryforward schedules

Please prepare the equity entries for the Parent for 2010
 
 We need to put the Stuffing back into the Turkey as a consolidated group as of December 31, 2010. So please complete the working papers to consolidate the financial statements for 2010 including all entries required in good journal form. Also prepare all proofs that you deem necessary (please note I am looking for your discretion on what you should prove but I believe there is a minimum that you need to do, so use your professional judgment and hopefully you will do all the right ones). If you believe there is an error in the underlying accounting of the parent's equity accounting please make the appropriate correcting entry

Turkey with Stuffing Consolidated Group Consolidation Working Papers at December 31, 2010 Turkey Stuffing Eliminations Consolidated Db (Cr) Db (Cr) Debit Credit Db (Cr) INCOME STATEMENT Sales (90,000) (35,000) Income from Stuffing (1,330) Gain on Sale of Plucking Mach (1,000) Loss on Feather Trimming Mach 2,000 Cost of sales 40,000 20,000 Depreciation exp 6,000 2,000 Other Expenses 24,500 8,000 Net income (21,830) (3,000) Retained Earnings 1/1 (24,170) (12,000) Add: Net income (21,830) (3,000) Dividends 10,000 3,000 Retained Earnings 12/31 (36,000) (12,000) BALANCE SHEET Cash 9,400 1,500 Receivables 1,500 2,700 Dividends Rec 2,000 Inventories 12,000 6,000 Plant/Equipment-net 41,000 21,500 Investment in Stuffing 26,400 TOTAL ASSETS 92,300 31,700 LIAB. & EQUITY Accounts payable (6,300) (2,200) Dividend payable (1,500) Other Debt (10,000) (1,000) Capital stock (40,000) (15,000) Retained Earnings (36,000) (12,000) TOTAL LIAB. & EQUITY (92,300) (31,700)
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