28. Plaza, Inc., acquires 80 percent of the outstanding common stock of Stanford Corporation on

January

1, 2018, in exchange for $900,000 cash. At the acquisition date, Stanfords total fair value,

including the noncontrolling interest, was assessed at $1,125,000. Also at the acquisition date,

Stanfords book value was $690,000.

Several individual items on Stanfords financial records had fair values that differed from their

book values as follows:

BOOK VALUE FAIR VALUE

Tradenames (indefinite life) . . . . . . . . . . . . . . . . . . . $ 360,000 $383,000

Property and equipment (net, 8-year

remaining life) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 290,000 330,000

Patent (14-year remaining life) . . . . . . . . . . . . . . . . . 132,000 272,000

LO 4-1, 4-5, 4-6

For internal reporting purposes, Plaza, Inc., employs the equity method to account for this

investment. The following account balances are for the year ending December 31, 2018, for both

companies.

Plaza Stanford

Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(1,400,000) $ (825,000)

Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . 774,000 395,750

Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . 328,000 36,250

Amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . 0 28,000

Equity in income of Stanford . . . . . . . . . . . . . . . . . . . (280,000) 0

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (578,000) $ (365,000)

Retained earnings, 1/1/18 . . . . . . . . . . . . . . . . . . . . . $(1,275,000) $ (530,000)

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (578,000) (365,000)

Dividends declared . . . . . . . . . . . . . . . . . . . . . . . . . . . 300,000 50,000

Retained earnings, 12/31/18 . . . . . . . . . . . . . . . . $(1,553,000) $ (845,000)

Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 860,000 $ 432,250

Investment in Stanford . . . . . . . . . . . . . . . . . . . . . . . . 1,140,000 0

Tradenames . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240,000 360,000

Property and equipment (net) . . . . . . . . . . . . . . . . . . 1,030,000 253,750

Patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 104,000

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,270,000 $ 1,150,000

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (142,000) $ (145,000)

Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (300,000) (120,000)

Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . (1,275,000) (40,000)

Retained earnings (above) . . . . . . . . . . . . . . . . . . . . . (1,553,000) (845,000)

Total liabilities and equities . . . . . . . . . . . . . . . . . . $(3,270,000) $(1,150,000)

At year-end, there were no intra-entity receivables or payables.

Prepare a worksheet to consolidate the financial statements of Plaza, Inc., and its subsidiary Stanford.