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Balance sheets for P Company and S Company on August 1, 2011, are as follows:

P Company S Company

Cash $ 165,500 $106,000

Receivables 366,000 126,000

Inventory 261,000 108,000

Investment in bonds 306,000 —0—

Investment in S Company stock 586,500 —0—

Plant and equipment (net) 573,000 320,000

Land 200,000 300,000

Total $2,458,000 $960,000

Accounts payable $ 174,000 $ 58,000

Accrued expenses 32,400 26,000

Bonds payable, 8% —0— 200,000

Common stock 1,500,000 460,000

Other contributed capital 260,000 60,000

Retained earnings 491,600 156,000

Total $2,458,000 $960,000

Required: Prepare a workpaper for a consolidated balance sheet for P Company and its subsidiary on  August 1, 2011, taking into consideration the following:

1.  P Company acquired 90% of the outstanding common stock of S Company on August 1, 2011, for a cash payment of $586,500.

  1.  Included in the Investment in Bonds account are $40,000 par value of S Company bonds payable that were purchased at par by P Company in 2002. The bonds pay interest on April 30  and October 31. S Company has appropriately accrued interest expense on August 1, 2011;

P Company, however, inadvertently failed to accrue interest income on the S Company bonds.

3. Included in P Company receivables is a $35,000 cash advance to S Company that was mailed on August 1, 2011. S Company had not yet received the advance at the time of the preparation of its August 1, 2011, balance sheet.

4. Assume that any excess of book value over the value implied by purchase price is due to overvalued plant and equipment.