Reference no: EM13950672

Worksheet, two subsidiaries, preferred stock, intercompany merchandise and ?xed assets, bonds. The following information pertains to Titan Corporation and its two subsidiaries, Boat Corporation and Engine Corporation:

a. The three corporations are all in the same industry and their operations are homogeneous. Titan Corporation exercises control over the boards of directors of Boat Corporation and Engine Corporation and has installed new principal of?cers in both.

b. Boat Corporation has a retained earnings balance of $92,000 at January 1, 20X7, and has income of $15,000 for the ?rst three months of 20X7 and $20,000 for the ?rst six months of 20X8.

c. Titan Corporation acquires 250 shares of fully participating Engine preferred stock for $7,000 and 14,000 shares of Engine common stock for $196,000 on January 2, 20X8. Engine Corporation has a net income of $20,000 in 20X8 and does not declare any dividends.

d. Engine Corporation's inventory includes $22,400 of merchandise acquired from Boat Corporation subsequent to July 20X8, for which no payment has been made. Boat Corpora- tion marks up the merchandise 40% on cost.

e. Titan Corporation acquires in the open market twenty-?ve $1,000, 6% bonds of Boat Cor- poration for $21,400 on January 1, 20X5. Boat Corporation bonds mature December 31, 20Y0. Interest is paid each June 30 and December 31. Straight-line amortization is allowed on the basis of materiality.

f. The 20X8 year-end balance in the investment in Boat Corporation stock account is com- posed of the items shown in the following schedule:

Date	Description	Amount
April 1, 20X7	Cost of 5,000 shares of Boat Corporation stock	$  71,400
December 31, 20X7	20% of the dividends declared in December 20X7 by Boat Corporation	(9,000)
December 31, 20X7	20% x 20X7 annual net income of $60,000 for Boat Corporation	12,000
July 1, 20X8	Cost of 15,000 shares of Boat Corporation	226,200
December 31, 20X8	80% of the dividends declared in December 20X8 by Boat Corporation	(24,000)
December 31, 20X8	80% of the 20X8 June-December net income of Boat Corporation	16,000
December 31, 20X8	Total .	$292,600

g. Titan Corporation does not properly adjust the prior 20% investment when it acquires the 60% interest on July 1, 2008.

h. The December 31, 20X8, trial balances for the three corporations appear as follows:

	Titan Corporation	Boat Corporation	Engine Corporation
Cash	100,000	87,000	95,000
Accounts Receivable	158,200	210,000	105,000
Inventories	290,000	90,000	115,000
Advance to Boat Corporation	17,000
Dividends Receivable	24,000
Property, Plant, and Equipment	777,600	325,000	470,000
Accumulated Depreciation	(180,000)	(55,000)	(160,000)
Investment in Boat Corporation: 6% Bonds	23,800
Common Stock	292,600*
Investment in Engine Corporation:
Preferred Stock	7,400
Common Stock	207,200
Notes Payable	(45,000)	(14,000)	(44,000)
Accounts Payable	(170,000)	(96,000)	(86,000)
Bonds Payable	(285,000)	(150,000)	(125,000)
Discount on Bonds Payable	8,000
Dividends Payable	(22,000)	(30,000)
Preferred Stock ($20 par)	(400,000)		(50,000)
Common Stock ($10 par)	(600,000)	(250,000)	(200,000)
Retained Earnings, January 1, 20X8	(154,600)	(107,000)	(100,000)
Sales	(1,050,000)	(500,000)	(650,000)
Other Revenue	(2,100)
Subsidiary Income:
Common Stock (Boat)	(16,000)
Preferred Stock (Engine)	(400)
Common Stock (Engine)	(11,200)
Cost of Goods Sold	650,000	300,000	400,000
Other Expenses	358,500	160,000	230,000
Dividends Declared	22,000	30,000
Totals	0	0	0

*Correction required.

Required

1. Prepare any adjustment needed to the investment account as a result of the July, 1, 20X8, acquisition.

2. Prepare the worksheet necessary to produce the consolidated ?nancial statements of Titan Corporation and its subsidiaries as of December 31, 20X8. Correct the trial balances prior to consolidating. Consolidated retained earnings should be allocated to Titan Corporation, and the NCIs should be shown separately in the Consolidated Balance Sheet column. All supporting computations and schedules should be in good form.