2. On January 1, 2009, Peterson Corporation exchanged $1,090,000 fair-value consideration for all of the outstanding voting stock of Santiago, Inc. At the acquisition date, Santiago had a book value equal to $950,000. Santiago's individual assets and liabilities had fair values equal to their respective book values except for the patented technology account, which was undervalued by $240,000 with an estimated remaining life of six years. On December 31, 2009 each company submitted the following financial statements for consolidation. Income Statement Peterson Corp. Santiago, Inc. Revenues Cost of goods sold Gain on purchase Depreciation Equity earnings from Santiago 535,000 (170,000) 100,000 (125,000) 160,000 495,000 (155,000 0 (140,000 0 Net Income 500,000 200,000 Statement of Ret. Earnings Retained Earnings, 1/1 Net Income (above) Dividends paid 1,500,000 500,000 (200,000 650,000 200,000 (50,000) Retained Earnings, 31/12 1,800,000 800,000 Balance Sheet Current Assets Investment in Santiago Trademarks Patented technology Equipment 190,000 1,300,000 100,000 300,000 610,000 300,000 0 200,000 400,000 300,000 Total assets 2,500,000 1,200,000 Liabilities Common stock Retained earnings, 31/12 165,000 535,000 1,800,000 100,000 300,000 800,000 Total liabilities and equity 2,500,000 1,200,000 Prepare necessary journal entries and consolidated worksheet using equity method. 2. On January 1, 2009, Peterson Corporation exchanged $1,090,000 fair-value consideration for all of the outstanding voting stock of Santiago, Inc. At the acquisition date, Santiago had a book value equal to $950,000. Santiago's individual assets and liabilities had fair values equal to their respective book values except for the patented technology account, which was undervalued by $240,000 with an estimated remaining life of six years. On December 31, 2009 each company submitted the following financial statements for consolidation. Income Statement Peterson Corp. Santiago, Inc. Revenues Cost of goods sold Gain on purchase Depreciation Equity earnings from Santiago 535,000 (170,000) 100,000 (125,000) 160,000 495,000 (155,000 0 (140,000 0 Net Income 500,000 200,000 Statement of Ret. Earnings Retained Earnings, 1/1 Net Income (above) Dividends paid 1,500,000 500,000 (200,000 650,000 200,000 (50,000) Retained Earnings, 31/12 1,800,000 800,000 Balance Sheet Current Assets Investment in Santiago Trademarks Patented technology Equipment 190,000 1,300,000 100,000 300,000 610,000 300,000 0 200,000 400,000 300,000 Total assets 2,500,000 1,200,000 Liabilities Common stock Retained earnings, 31/12 165,000 535,000 1,800,000 100,000 300,000 800,000 Total liabilities and equity 2,500,000 1,200,000 Prepare necessary journal entries and consolidated worksheet using equity method