Jefferson, Inc., acquires Hamilton Corporation on January 1, 2009, in exchange for $510,000 cash. Immediately after the acquisition, the two companies have the following account balances. Hamil¬ ton’s equipment (with a five-year life) is actually worth $450,000. Credit balances are indicated by parentheses.

Current assets .

Investment in Hamilton LO1 Equipment.

Liabilities.

Common stock.

Retained earnings Jefferson

$ 300,000 510,000 600,000 (200,000) (350,000) (860,000)

Hamilton

$ 210,000 -0- 400,000 (160,000) (150,000) (300,000)

In 2009, Hamilton earns a net income of $55,000 and pays a $5,000 cash dividend. At the end of 2010, selected account balances for the two companies are as follows:

Revenues.

Expenses.

Investment income.

Retained earnings, 1/1/10 Common stock.

Current assets.

Investment in Hamilton .

Equipment.

Liabilities.

Jefferson

$(400,000) 290,000 Not given Not given (350,000) 360,000 Not given 520,000 (170,000)

Hamilton

$(240,000)

180,000

-0-

(350,000)

(150,000)

140,000

-0-

420,000

(190,000)

a. What will be the December 31, 2010, balance in the Investment Income account and the Invest¬ ment in Hamilton account under each of the three methods described in this chapter?

b. How is the consolidated Expenses account affected by the accounting method the parent uses to record ownership of this subsidiary?

c. How is the consolidated Equipment account affected by the accounting method the parent uses to record ownership of this subsidiary?

d. What is Jefferson’s Retained Earnings account balance as of January' 1, 2010, under each of the three methods described in this chapter?

e. What is Entry *C on a consolidation worksheet for 2010 under each of the three methods described in this chapter?
f What is Entry S on a consolidation worksheet for 2010 under each ofthe three methods described in this chapter?
g. What is consolidated net income for 2010?