The Krause Corporation acquired 80 percent ofthe 100,000 outstanding voting shares ofLeahy, Inc., for $6.30 per share on January 1, 2009. The remaining 20 percent of Leahy’s shares also traded actively at $6.30 per share before and after Krause’s acquisition. An appraisal made on that date determined that all book values appropriately reflected the fair values ofLeahy’s underlying accounts except that a building with a 5-year life was undervalued by $45,000 and a fully amortized trademark with an estimated 10-year remaining life had a $60,000 fair value. At the acquisition date, Leahy reported common stock of $100,000 and a retained earnings balance of $280,000.

Following are the separate financial statements for the year ending December 31, 2010. LO6 Sales ......

Krause Corporation

.... $ (584,000)

Leahy, Inc.

$(250,000)

Cost of goods sold ...

194,000 95,000 Operating expenses ...

246,000 65,000 Dividend income ....................

(16,000)

-0-

Net income ..

.... $ (160,000)

$ (90,000)

Retained earnings, 1/1/10.

. . . . $ (700,000)

$(350,000)

Net income (above) ..

(160,000)

(90,000)

Dividends paid..

70,000 20,000 Retained earnings, 12/31/10 ...........

. . . . $ (790,000)

$(420,000)

Current assets ...... . . .

. . . . $ 296,000

$ 191,000 Investment in Leahy, Inc. ...

504,000

-0-

Buildings and equipment (net) ..

680,000 390,000 Trademarks...

100,000 144,000 Total assets...

. ... $1,580,000

$ 725,000 Liabilities .......

. . , . $ (470,000)

$(205,000)

Common stock ...

(320,000)

(100,000)

Retained earnings, 12/31/10 (above) .

(790,000)

(420,000)

Total liabilities and equities ..

. ... $(1,580,000)

$(725,000)

a. Prepare a worksheet to consolidate these two companies as of December 31,2010.

b. Prepare a 2010 consolidated income statement for Krause and Leahy.

c. If instead the noncontrolling interest shares of Leahy had traded for $4.85 surrounding Krause’s acquisition date, how would the consolidated statements change?