Applying the Equity Method: Consolidation Entries Pitt Inc. acquired 100% of Sitters Inc.’s out¬ standing common stock at a cost of $310,000 on 1/1/06. The analysis of the investment by the components of the major conceptual elements as of the acquisition date (after appropriate alloca¬

tion of the bargain purchase element) follows:

1. Assuming that Pitt uses the equity method of accounting, prepare the journal entries it would make for 2006 and 2007 with respect to its investment in the subsidiary.
2. Prepare an analysis of the Investment account by the individual components of the major con¬
ceptual elements as of the acquisition date and update it for the entries developed in require¬ ment 1.
3. Prepare all consolidation entries as of 12/31/06 and 12/31/07.