8 separate income statements of pingair corporation and its 90 owned subsidiary stau 4307626

8) Separate income statements of Pingair Corporation and its 90%-owned subsidiary, Staunch Inc., for 2011 were as follows:

Pingair Staunch

Sales Revenue$2,200,000 $1,000,000

Cost of sales(1,400,000)(600,000)

Other expenses(400,000)(200,000)

Gain on equipment80,000

Income from Staunch128,000          

Net income$608,000 $200,000

Additional information:

1.Pingair acquired its 90% interest in Staunch Inc. when the book values were equal to the fair values.

2.The gain on equipment relates to equipment with a book value of $120,000 and a 4-year remaining useful life that Pingair sold to Staunch for $200,000 on January 2, 2011. The straight-line depreciation method is used.  The equipment has no salvage value.

3.Pingair sold inventory to Staunch in 2010 and 2011 as shown in the table below.  (The 2010 ending inventory is sold in 2011.)

20102011

Intercompany sales$300,000200,000

Original cost from third-party180,000120,000

Percentage unsold at year-end4050

4.Staunch did not declare or pay dividends in 2010 and 2011.

Required:

1. Prepare adjusting/eliminating entries for the consolidation worksheet at December 31, 2011.

2. Prepare a consolidated income statement for Pingair Corporation and Subsidiary for the year ended December 31, 2011.