Prime Corporation acquired 80 percent of Steak Company's voting shares on January 1, 20X4, for $280,000 in cash and marketablesecurities. At that date, the noncontrolling Interest had a fair value of $70,000 and Steak reported net assets of $300,000. AssumePrime uses the fully adjusted equity method. Trial balances for the two companies on December 31, 20X7, are as follows:Steak CompanyItenCashAccounts ReceivableInventoryBuildings and EquipmentInvestment in Steak CompanyCost of Goods SoldDepreciation ExpenseOther ExpensesDividends DeclaredAccumulated DepreciationAccounts PayableBonds PayableBond PremiumConnon StockAdditional Paid-in CapitalRetained EarningsSalesOther IncomeIncome from Steak CompanyTotalNoABCDELLFGEvent1Additional Information1. The full amount of the differential at acquisition was assigned to buildings and equipment with a remaining 10-year economic life.2. Prime and Steak regularly purchase Inventory from each other. During 20X6, Steak Company sold Inventory costing $40,000 toPrime Corporation for $60,000, and Prime resold 60 percent of the Inventory In 20X6 and 40 percent In 20X7. Also in 20X6, Primesold Inventory costing $20,000 to Steak for $26,000. Steak resold two-thirds of the Inventory in 20X6 and one-third In 20x7.3. During 20X7, Steak sold Inventory costing $30,000 to Prime for $45,000, and Prime sold Items purchased for $9,000 to Steak for$12,000. Before the end of the year, Prime resold one-third of the Inventory it purchased from Steak in 20X7. Steak continues tohold all the units purchased from Prime during 20X7.4. Steak owes Prime $10,000 on account on December 31, 20X7.25. Assume that both companies use straight-line depreciation and that no property, plant, and equipment has be purchased sincethe acquisition.Required:3a. Prepare the 20X7 journal entries recorded on Prime's books related to its Investment in Steak if Prime uses the equity method.Note: If no entry is required for a transaction/event, select "No Journal entry required" in the first account field.5Prime Corporation6Debit$ 130,30080,000170,0007600,000293,000416,00030,00024,00050,000$ 1,793,300CashInvestment in Steak CompanyIncome from Steak CompanyDepreciation expenseAccumulated depreciationAnswer is not complete.General JournalInvestment in Steak CompanyCredit$ 310,000100,000300,000200,000337,500500,00020,40025,400$ 1,793,300Investment in Steak CompanyInvestment in Steak CompanyInvestment in Steak CompanyIncome from Steak CompanyDebit$ 10,00070,000110,000400,000Depreciation expenseInvestment in Steak Company202,00020,00018,00025,000$ 855,00033XX3X››3*Credit$120,00015,200100,000X4,888100,00020,000215,000250,00030,000$ 855,00020,000Debit32,000 ✓Credit32,000✔20,000✔b. Prepare all consolidation entries needed to complete a consolidation worksheet as of December 31, 20X7.Note: If no entry is required for a transaction/event, select "No Journal entry required" in the first account field.

Question

Prime Corporation acquired 80 percent of Steak Company's voting shares on January 1, 20X4, for $280,000 in cash and marketablesecurities. At that date, the noncontrolling Interest had a fair value of $70,000 and Steak reported net assets of $300,000. AssumePrime uses the fully adjusted equity method. Trial balances for the two companies on December 31, 20X7, are as follows:Steak CompanyItenCashAccounts ReceivableInventoryBuildings and EquipmentInvestment in Steak CompanyCost of Goods SoldDepreciation ExpenseOther ExpensesDividends DeclaredAccumulated DepreciationAccounts PayableBonds PayableBond PremiumConnon StockAdditional Paid-in CapitalRetained EarningsSalesOther IncomeIncome from Steak CompanyTotalNoABCDELLFGEvent1Additional Information1. The full amount of the differential at acquisition was assigned to buildings and equipment with a remaining 10-year economic life.2. Prime and Steak regularly purchase Inventory from each other. During 20X6, Steak Company sold Inventory costing $40,000 toPrime Corporation for $60,000, and Prime resold 60 percent of the Inventory In 20X6 and 40 percent In 20X7. Also in 20X6, Primesold Inventory costing $20,000 to Steak for $26,000. Steak resold two-thirds of the Inventory in 20X6 and one-third In 20x7.3. During 20X7, Steak sold Inventory costing $30,000 to Prime for $45,000, and Prime sold Items purchased for $9,000 to Steak for$12,000. Before the end of the year, Prime resold one-third of the Inventory it purchased from Steak in 20X7. Steak continues tohold all the units purchased from Prime during 20X7.4. Steak owes Prime $10,000 on account on December 31, 20X7.25. Assume that both companies use straight-line depreciation and that no property, plant, and equipment has be purchased sincethe acquisition.Required:3a. Prepare the 20X7 journal entries recorded on Prime's books related to its Investment in Steak if Prime uses the equity method.Note: If no entry is required for a transaction/event, select &#34;No Journal entry required&#34; in the first account field.5Prime Corporation6Debit$ 130,30080,000170,0007600,000293,000416,00030,00024,00050,000$ 1,793,300CashInvestment in Steak CompanyIncome from Steak CompanyDepreciation expenseAccumulated depreciationAnswer is not complete.General JournalInvestment in Steak CompanyCredit$ 310,000100,000300,000200,000337,500500,00020,40025,400$ 1,793,300Investment in Steak CompanyInvestment in Steak CompanyInvestment in Steak CompanyIncome from Steak CompanyDebit$ 10,00070,000110,000400,000Depreciation expenseInvestment in Steak Company202,00020,00018,00025,000$ 855,00033XX3X››3*Credit$120,00015,200100,000X4,888100,00020,000215,000250,00030,000$ 855,00020,000Debit32,000 ✓Credit32,000✔20,000✔b. Prepare all consolidation entries needed to complete a consolidation worksheet as of December 31, 20X7.Note: If no entry is required for a transaction/event, select &#34;No Journal entry required&#34; in the first account field.

Accepted Answer

Consolidation is an activity in which financial statements of a parent and its subsidiary should be…