Champion Corporation purchased 70 percent of the voting common stock of Morris Company for \(\$ 154,500\) on January 1, 20X3, when Morris reported common stock outstanding of \(\$ 100,000\) and retained earnings of \(\$ 85,000\). At that date Morris held buildings and equipment with a fair value \(\$ 25,000\) greater than book value and a 10 -year remaining life. The additional payment in excess of book value is assigned to a copyright held by Morris with a five-year life at the date of acquisition.

Trial balances for Champion Corporation and Morris Company on December 31, 20X5, are as follows:

Champion sold land it purchased for \(\$ 21,000\) to Morris on September 20, 20X4, for \(\$ 32,000\). Morris plans to use the land for future plant expansion. On January 1, 20X5, Morris sold equipment to Champion for \(\$ 92.000\). Morris purchased the equipment on January 1, 20X3, for \(\$ 100,000\) and depreciated it on a 10 -year basis, including an estimated residual value of \(\$ 10,000\). The residual value and estimated economic life of the equipment remained unchanged as a result of the transfer and both companies use straight-line depreciation.
\section*{Required}

a. Compute the amount of unamortized purchase differential at January 1, 20X5.

b. Prepare a reconciliation between the balance in the Investment in Morris Company Stock account reported by Champion at December 31, 20X5, and the underlying book value of net assets reported by Morris at that date.

c. Give all eliminating entries needed to prepare a full set of consolidated financial statements at December 31, 20X5, for Champion Corporation and Morris Company.

d. Prepare a three-part workpaper for 20X5 in good form.

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Champion Corporation Morris Company Debit Debit Credit Credit Cash Accounts Receivable $ 20.250 $ 58.000 65,000 70,000 Interest and Other Receivables 30.000 10.000 Inventory 150.000 180,000 Land 80,000 60.000 Buildings and Equipment 315.000 240,000 Bond Discount 15.000 Investment in Morris Company Stock 172.750 Cost of Goods Sold 375.000 110.000 Depreciation Expense 25.000 10.000 Interest Expense 24.000 33,000 Other Expense 28.000 17.000 Dividends Declared 30.000 5.000 Accumulated Depreciation- Buildings and Equipment $ 120,000 $ 60,000 Accounts Payable 61.000 28,000 Other Payables 30.000 20.000 Bonds Payable 250.000 300.000 Common Stock 150.000 100,000 Additional Paid-In Capital 30,000 Retained Earnings 178.000 100.000 Sales 450.000 190,400 Other Income 28.250 Gain on Sale of Equipment 9.600 Interest Expense 24.000 33.000 Other Expense 28.000 Dividends Declared 30.000 17,000 5.000 Accumulated Depreciation- Buildings and Equipment $ 120.000 $ 60.000 Accounts Payable 61.000 28.000 Other Payables 30,000 20,000 Bonds Payable 250.000 300.000 Common Stock 150,000 100,000 Additional Paid-In Capital 30.000 Retained Earnings 178.000 100.000 Sales 450.000 190,400 Other Income 28.250 Gain on Sale of Equipment 9.600 Income from Subsidiary 17.750 Total $1.315.000 $1.315.000 $808,000 $808.000