This is a question that I have spent quite some time and am still confused. Please point out how should it be solved in principle if you can. I list my specific questions at the end.
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@	@	P	@	S
Cash		83		80
AR(net)		213		112.5
Beg inv.		150		110
Inveswtment in S		578.25
Other Assets		500		400
Dividends Declared		100		30
Purchases		850		350
Other exps		180		137.5
		2654.25	@	1220
AP		70		30
Other Liab		75		40
Common stock		800		500
Retained earnings		562		120
Sales		1100		530
Equity in Sub inc.		47.25
		2654.25	@	1220
Ending inv.		200		120
The above is the pre-closing TB for the parent and the sub at 12/31/2013. P owns 90% of the common stock of S company. The stock was purchased for $540K on 1/1/2009 when S' RE were $100k.
The 1/1/2013 inventory of S includes $30K of profit recorded by P on 2012 sales. During 2013, P made inter-company sales of $200K with a markup of 25% on cost. The ending inventory of S includes goods purchased in 2013 from P for $50K. P uses the partial equity method to record its investment in S.
Question: Prepare the consolidated I/S and B/S for the year ended 12/31/2013.
I'm actually very confused about what would be the RE for the Sub. I need that info. to get the non-controlling interest for the B/S, also, I don't know if the intercompany profit should be eliminated or not when considering S's RE? I'm just lostc Please help!!! THanks!