Pheasant Corporation Owns 80% of Sal Corporation's Outstanding Common Stock

question 40

Essay

Pheasant Corporation owns 80% of Sal Corporation's outstanding common stock that was purchased at book value equal to fair value on January 1, 2007.
Additional information:
1. Pheasant sold inventory items that cost $3,000 to Sal during 2014 for $6,000. One-half of this merchandise was inventoried by Sal at year-end. At December 31, 2014, Sal owed Pheasant $2,000 on account from the inventory sales. No other intercompany sales of inventory have occurred since Pheasant acquired its interest in Sal.
2. Pheasant sold equipment with a book value of $5,000 and a 5-year useful life to Sal for $10,000 on December 31, 2012. The equipment remains in use by Sal and is depreciated by the straight-line method. The equipment has no salvage value.
3. On January 2, 2014, Sal paid $10,800 for $10,000 par value of Pheasant's 10-year, 10% bonds. These bonds were originally sold at par value, and have interest payment dates of January 1 and July 1, and mature on January 1, 2018. Straight-line amortization has been applied by Sal to the Pheasant bond investment.
4. Pheasant uses the equity method in accounting for its investment in Sal.
Required:
Complete the working papers to consolidate the financial statements of Pheasant Corporation and Sal for the year ended December 31, 2014.

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