On January 1, 2019, Palmer Company acquired a 90% interest in Stevens Company at a cost of $1,000,000. At the purchase date, Stevens Company?s stockholders? equity consisted of the following:

Common stock............................$500,000Retained earnings.........................190,000

An examination of Stevens Company?s assets and liabilities revealed the following at the date of acquisition:

Additional Information?Date of Acquisition

Stevens Company?s equipment had an original life of 15 years and a remaining useful life of 10 years. All the inventory was sold in 2019. Stevens Company purchased its bonds payable on the open market on January 10, 2019, for $150,000 and recognized a gain of $55,556.

Financial statement data for 2021 are presented here:

Required:

A. What method is Palmer using to account for its investment in Stevens? How can you tell?

B. Prepare in general journal form the workpaper entry to allocate and depreciate the difference between book value and the value implied by the purchase price in the December 31, 2019, consolidated statements workpaper.

C. Prepare a consolidated financial statements workpaper for the year ended December 31, 2021.

D. Prepare in good form a schedule or t-account showing the calculation of the controlling and noncontrolling interest in consolidated net income for the year ended December 31, 2021.

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Book Value $ 90,726 Fair Value $ 90,726 200,000 Cash Accounts receivable Inventories Equipment Accumulated depreciation-equipment Land Bonds payable Other 200,000 160,000 300,000 (100,000) 190,000 (205,556) 210,000 390,000 (130,000) 290,000 (150,000) 54,830 54,830 $955,556 Total $690,000 Palmer Stevens Company Company Sales $620,000 $340,000 Cost of sales 430,000 240,000 Gross margin 190,000 100,000 Depreciation expense 30,000 20,000 Other expenses 60,000 35,000 Income from operations 100,000 45,000 Dividend income 31,500 Net income $131,500 $ 45,000 1/1 Retained earnings $ 297,600 $210,000 Net income 131,500 45,000 429,100 255,000 Dividends (120,000) (35,000) $ 309,100 $ 201,200 12/31 Retained earnings $220,000 Cash $151,000 Accounts receivable 221,000 173,000 Inventories 100,400 81,000 Investment in Stevens Company 1,000,000 Equipment 450,000 300,000 Accumulated depreciation-equipment (300,000) (140,000) Land 360,000 $2,032,600 290,000 $855,000 Total assets Accounts payable $ 323,500 $135,000 Bonds payable 400,000 Common stock 1,000,000 500,000 Retained earnings Total liabilities and equity 309,100 220,000 $2,032,600 $855,000