1. Following is the balance sheet for Cake at 1/1/2016. On 1/1/2016, Choco acquired all of the outstanding common stock of Cake for $1,700,000 in cash. Book value Fair value FV-BV Current assets $800,000 $800,000 Land 200,000 300,000 Patented technology (20 years) 400,000 600,000 Equipment (5 years) 600,000 750,000 Total assets Liabilities $1,000,000 $1,000,000 Common stock 200,000 Additional paid-in capital 300,000 Retained earnings 500,000 Total liabilities and stockholders' equity During 2016, Cake earns net income of $160,000 and pays a $60,000 cash dividend. 2. Continuing with question 1, Choco continues to hold Cake since 1/1/2016 and at the end of 2016, Choco wants to prepare consolidated financial statement. At the end of 2018, Choco and Cake have intra-entity receivable/payable of $12,000. Net income Cash dividends 2017 $200,000 $50,000 2018 280,000 100,000 (4) Prepare Consolidation Entry S, A, I, D, E, P Equity Method Consolidated Totals Income Statement Revenues Choco Company and Cake Company Consolidated Worksheet For Year Ending December 31, 2018 Choco Cake Consolidated Entries Company Company Debit Credit $(4.420,000) $(810,000) 2,390,000 370,000 710,000 160,000 (240,000) 0 $(1,560,000) $(280,000) Cost of goods sold Expense Equity in Cake earnings Net Income Statement of R.E. Retained earnings. 1/1/18 Net income (above) Dividends declared Retained earnings 12/31/18 $(2,380,000) (1,560,000) 500,000 $(3,440,000) $(750,000) (280,000) 100,000 $(930,000) Balance Sheet Current assets Investment in Cake $4,650,000 $1,570,000 2,010,000 Land 1,200,000 300,000 Patented technology 1,500,000 380,000 Equipment 2,600,000 550,000 Goodwill Total assets $11,960,000 $2,800,000 Liabilities $(4,120,000) $(1,370,000) Common stock (1,900,000) (200,000) Additional paid in capital (2,500,000) (300,000) Retained earnings 12/31/18 (3,440,000) (930.000) Total Liabilities and Equity $(11,960,000) $(2,800,000) (5) Prepare consolidated total column for worksheet attached (Table 4)