(1) Stubben Corporation is a 90%-owned subsidiary of Parker Corporation, acquired for $290,000 on 1/1/2005.

o Investment cost was equal to book value and fair value.

o Stubbens net income in 2005 was $80,000, and Parkers income, excluding its income from Stubben, was $100,000.

o Parkers income includes a $8,000 unrealized gain on land that cost $40,000 and was sold to Stubben for $48,000.

o Assume that Stubben sold the land in 2007 for $64,000. Assume Parker adjusts for this transaction in the equity accounts.

o Split up the adjustment for unrealized gains proportionately.

Required:

1. What Entry(ies) would Parker make in 2005 and 2007?

2. Prepare the consolidation entries at 12/31/2005, 12/31/2006, and 12/31/2007. (5 Marks)