1)

P acquired 100% shares of S for $190,000. On that date, the common stock of company S was $60,000 and its retained earnings were $90,000. Also, the fair value of equipment of S was $30,000 more than its book value and the fair value of inventory of S was $10,000 more than its book value. The consolidation entry to adjust the book values of the assets of S to their fair value will be:

		Debit equipment $30,000, debit inventory $10,000 and credit investment in S account $40,000
		Debit common stock $30,000, debit retained earnings $10,000 and credit investment in S account $40,000
		Debit investment in S account $40,000, credit equipment $30,000, credit retained earnings $10,000
		Debit common stock $60,000, debit inventory $10,000 and credit investment in S account $70,00

2)

P purchased 100% of S Company stock for $800,000 on Jan, 2018. The books value of the net assets of S was $650,000. The fair value of the net assets of S was equal to their book value except for land which had a fair value of $100,000 more than the book value and equipment which had a fair value of $60,000 more than the book value. The remaining useful life of equipment is ten years. S reported a net income of $60,000 and a dividend payment of $12,000 during the year 2018. What amount of income will be reported by P for its investment in S for the year 2018? Assume P uses the equity method.

		$48,000
		$54,000
		$160,000
		$60,000