1. Pillow Company acquired 80 percent ownership of Sheet Company on January 1, 20X8 for $173,000. At that date, the fair value of the noncontrolling interest was $43,250. 

2. On January 1, 20X8, Sheet reported net assets with a book value of $150,000 and a fair value of $191,250. The difference between fair value and a book value of Sheet's net assets is as follows: Amount Life Inventory $6,250 all sold in 20X8 Land 20,000 Indefinite Buildings and Equipment 15,000 5 years $41,250 

Goodwill Indefinite 

3. Accumulated Depreciation on buildings and equipment was $75,000 on the acquisition date. 

4. On December 31, 20X8, Pillow's management reviewed the amount attributed to goodwill and concluded goodwill was impaired and should be reduced to $23,000. Goodwill and goodwill impairment were assigned proportionately to the controlling and noncontrolling shareholders. 

5. Pillow used the equity method in accounting for its investment in Sheet. 

6. Detailed analysis of receivables and payables showed that Pillow owed Sheet $9,000 on December 31, 20X8.

REQUIRED:

1) Consolidation Entries made by Pillow 

2) Consolidation worksheet

	Pillow Company		Sheet Company
Item	Debit	Credit	Debit	Credit
Cash	68,000		51,000
Accounts Receivable	108,000		41,000
Inventory	275,000		108,000
Land	95,000		30,000
Buildings and Equipment	500,000		150,000
Investment in Sheet Company	180,000
Cost of Goods Sold	490,000		310,000
Depreciation Expense	25,000		15,000
Other Expenses	62,000		100,000
Dividends Declared	45,000		25,000
Accumulated Depreciation		180,000		90,000
Accounts Payable		86,000		40,000
Mortgages Payable		220,000		80,000
Common Stock		300,000		50,000
Retained Earnings		385,000		100,000
Sales		650,000		470,000
Income from Sheet Company		27,000
	$ 1,848,000	$ 1,848,000	$ 830,000	$ 830,000