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 earnings190,000

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. Palmer Company uses the partial equity method to record its investment in Stevens Company. Financial statement data for 2013 are presented here:
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. Palmer Company uses the partial equity method to record its investment in Stevens Company. Financial statement data for 2013 are presented here:

Continue.

Required:
A. 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.
B. Prepare a consolidated financial statements workpaper for the year ended December 31, 2013.
C. Prepare in good form a schedule or t-account showing the calculation of the controlling interest in consolidated net income for the year ended December 31, 2013. If you completed Problem 5-5, a comparison of the consolidated balances in this problem with those you obtained in Problem 5-5 will demonstrate that the method (cost or partial equity) used by the parent company to record its investment in a consolidated subsidiary has no effect on the consolidatedbalances.

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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 300000 (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 8955.556 Total Palmer Stenens Company Company $340,000 Sales Cost of sales Gross margin Depreciation expense Other expenses 620,000 430,000 190,000 30,000 60,000 100,000 40,500 100,000 20,000 35,000 45,000 Income from operations Equity in subsidiary income Net income 140,500 $ 45,000 $210,000 45,000 255,000 (35,000) 336,100 220,000 315,600 140,500 456,100 1/1 Retained earnings Net income (120,000) Dividends 12/31 Retained earnings Palmer Stenens Company Company Cash Accounts receivable Inventories Investment in Stevens Company Equipment Accumulated depreciation-equipment Land 201,200 221,000 100,400 $151,000 173,000 81,000 1,027,000 450,000 (300,000) 360,000 300,000 (140,000) 290,000 $209 600 855.00 Total assets 323,500 400,000 $135,000 ccounts payable Bonds pavable Common stock Retained earnings 500,000 220,000 %2,059600855,000 1,000,000 336,100 Total liabilities and equity