On January 1, 2011, Palmer Company acquired a 90% interest in Stevens Company at a cost of $1,000,000. At the purchase date, Stevens Company’s stockholders’ equity consisted of the following:

Common stock......$500,000

Retained earnings....190,000

An examination of Stevens Company’s assets and liabilities revealed the following at the date of acquisition:

Additional Information—Date of Acquisition
Stevens Company’s equipment had an original life of 15 years and a remaining useful life of
10 years. All the inventory was sold in 2011. Stevens Company purchased its bonds payable on the open market on January 10, 2011, for $150,000 and recognized a gain of $55,556. Financial statement data for 2013 are presented here:

Required:
A. What method is Palmer using to account for its investment in Stevens? How can you tell?
B. Prepare in general journal form the workpaper entry to allocate and depreciate the difference between book value and the value implied by the purchase price in the
December 31, 2011, consolidated statements workpaper.
C. Prepare a consolidated financial statements workpaper for the year ended December 31, 2013.
D. Prepare in good form a schedule or t-account showing the calculation of the controlling and non-controlling interest in consolidated net income for the year ended December 31,2013.

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Book Value Fair Value Cash Accounts receivable Inventories Equipment Accumulated depreciation-equipment Land Bonds payable Other 90,726 200,000 160,000 300,000 (100,000) 190,000 (205,556) 54,830 $690,000 90,726 200,000 210,000 390,000 (130,000) 290,000 (150,000) 54,830 955,556 Total Palmer Stevens Company Company $620,000 430,000 190,000 30.000 60.000 100,000 1,500 8181.500 340,000 240,000 100,000 20,000 35,000 45,000 Sales Cost of sales Gross margin OSS IT Depreciation expense Other expenses Income from operations Dividend income Net income 45,000 Palmer Stevens Company Company 1/1 Retained earnings Net income 297,600 131,500 429,100 (120,000) 309,100 $210,000 45,000 255,000 (85,000) 220,000 Dividends 12/31 Retained earnings Cash Accounts receivable Inventories Investment in Stevens Company Equipment Accumulated depreciation-equipment Land 201,200 221,000 100,400 1,000,000 450,000 (300,000) 360,000 2,032.600 $151,000 173,000 81,000 300,000 (140,000) 290,000 855,000 Total assets Accounts payable Bond Common stock Retained earnings s payable 400,000 1,000,000 309,100 2,082,600 500,000 220,000 $855,000 Total liabilities and equity