Following are selected accounts for Mergaronite Company and Hill, Inc., as of December 31, 2013. Several ot Mergaronite s accounts have been omitted. Credit balances are indicated by parentheses.

Revenues. LO1 Cost of goods sold.

Depreciation expense . . .

Investment income.

Retained earnings, 1/1/13 Dividends paid.

Current assets.

Land.

Buildings (net).

Equipment (net).

Liabilities.

Common stock.

Additional paid-in capital Mergaronite Hill

$(600,000)

$(250,000)

280,000 100,000 120,000 50,000 Not given NA

(900,000)

(600,000)

130,000 40,000 200,000 690,000 300,000 90,000 500,000 140,000 200,000 250,000

(400,000)

(310,000)

(300,000)

(40,000)

(50,000)

(160,000)

Assume that Mergaronite took over Hill on January 1, 2009, by issuing 7,000 shares of common stock having a par value of $10 per share but a fair value of $100 each. On January 1,2009, Hill’s land was undervalued by $20,000, its buildings were overvalued by $30,000, and equipment was undervalued by $60,000. The buildings had a 10-vear life; the equipment had a 5-year life. A cus¬ tomer list with an appraised value of $100,000 was developed internally by Hill and was to be writ¬ ten off over a 20-year period.

a. Determine and explain the December 31, 2013, consolidated totals for the following accounts: Revenues Cost of Goods Sold Depreciation Expense Amortization Expense Buildings Equipment Customer List Common Stock Additional Paid-In Capital

b. In requirement (a), why can the consolidated totals be determined without knowing which method the parent used to account for the subsidiary?

c. If the parent uses the equity method, what consolidation entries would be used on a 2013 worksheet?