Reference no: EM132712467

On January 1, 2014, Paterson Company purchased 60% of the common stock of Smith Company for $540,000. At that time, Smith's stockholders' equity consisted of $70,000 of Common stock, $190,000 of other contributed capital, and $240,000 of Retained earnings. Any difference between implied and book value relates to Smith's land. Paterson uses the cost method to record its investment in Smith. Its fiscal year ends on December 31.

Additional information for both companies for 2020 follows:

                                                   Paterson                  Smith

Common stock                      $300,000               $70,000
Other contributed capital          520,000               190,000
Retained Earnings, 1/1/2020        940,000               370,000
Net Income for 2020                   262,000                 89,000
Dividends declared in 2020            40,000                     21,000

Required:

Problem (a) make all the necessary eliminating entries on a consolidated statements workpaper on 12/31/2020.

Problem (b) Calculate the consolidated net income for 2020.