Reference no: EM132693637
Question - The following balance sheets have been prepared on December 31, 2020 for Pat Corp. and Rat Inc.
Pat Rat
Cash $30,000 $20,000
Inventory $70,000 $30,000
Accounts Receivable $180,000 $70,000
Investment in Rat $200,000
Fixed Assets $500,000 $90,000
Accumulated Depreciation ($280,000) ($30,000)
Total Assets $700,000 $180,000
Current Liabilities $120,000 $60,000
Long-Term Debt $400,000 $20,000
Common Shares $90,000 $40,000
Retained Earnings $90,000 $60,000
Liabilities and Equity $700,000 $180,000
Additional Information:
Pat uses the cost method to account for its 50% interest in Rat, which it acquired on January 1, 2017. On that date, Rat's retained earnings were $20,000. The acquisition differential was fully amortized by the end of 2020.
Pat sold Land to Rat during 2019 and recorded a $15,000 gain on the sale. Pat is still using this Land. Pat's December 31, 2020 inventory contained a profit of $10,000 recorded by Rat.
Rat borrowed $20,000 from Pat during 2020 interest-free. Rat has not yet repaid any of its debt to Pat.
Both companies are subject to a tax rate of 20%.
Required - Prepare Consolidated Balance Sheet for Pat on December 31, 2020 assuming that Pat's investment in Rat is a control investment.