6-6: Use of cost method Assume that on 1/1/01 Big acquires 80% of Little for $400,000. The fair value of the non-controlling interest on that date was $100,000. Little's book value was $420,000, comprised of common stock of $50,000 and retained earnings of $370,000. All of Little's assets and liabilities had fair values equal to book value, except for equipment (10 year remaining life) which was undervalued by $50,000. Any remaining differential is attributed to goodwill. On 1/1/01 Little's Equipment had a cost of $300,000 and accumulated depreciation of $100,000 During 2001 and 2002 Little had the following: 2001 Reported earnings60,000 Dividends declared and paid 20,000 2002 80,000 30,000 Big uses the cost method to account for their investment in Little. Required: Prepare all elimination entries related to the consolidation for 2001 and 2002