For the fiscal year ended April 30, 2006, Scala Company, the 90%-owned subsidiary of Padua Corporation, had a net income of $120,000. During the year ended April 30, 2006, the following intercompany transactions and events occurred:
1. Padua sold merchandise to Scala for $180,000, at a markup of 20% on Padua’s cost. Merchandise acquired from Padua in Scala’s inventories totaled $54,000 on May 1, 2005, and $84,000 on April 30, 2006, at billed prices.
2. On May 1, 2005, Scala sold to Padua for $80,000 a machine with a carrying amount to Scala of $56,000. Padua established a remaining economic life of eight years, no residual value, and the straight-line method of depreciation for the machine.
3. On April 30, 2006, Padua acquired in the open market $200,000 face amount of Scala’s 10%, ten-year bonds for $158,658, a yield rate of 14%. Scala had issued $400,000 face amount of the bonds on October 31, 2005, for $354,120, a yield rate of 12%. The bonds paid interest each April 30 and October 31; Padua acquired its bond investment after the interest for April 30, 2006, had been paid to the previous bondholders. Both Scala and Padua use the interest method of amortization or accumulation of bond discount.
Prepare working paper eliminations (in journal entry format) for Padua Corporation and subsidiary on April 30, 2006, including the minority interest in net income of subsidiary. Disregard the elimination for the intercompany investment in the subsidiary’s common stock; also disregard income taxes.
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