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Following are separate financial statements of Michael Company and Aaron Company as of December 31, 2018 (credit balances indicated by parentheses). Michael acquired all of Aaron's outstanding voting stock on January 1, 2014, by issuing 20,000 shares of its own $1 par common stock. On the acquisition date, Michael Company's stock actively traded at $35.50 per share. Aaron Company 12/31/18 $ (478,500) 194,250 119,000 Revenues Cost of goods sold Amortization expense Dividend incone Net income Retained earnings, 1/1/18 Net income (above) Dividends declared Retained earnings, 12/31/18 Cash Receivables Inventory Investment in Aaron Company Copyrights Royalty agreements Total assets Liabilities Preferred stock Common stock Additional paid-in capital Retained earnings, 12/31/18 Total liabilities and equity Michael Company 12/31/18 $ (725,500) 327,750 137,700 (5,000) $ (265,050) $(1,048,000) (265,050) 90,000 $(1,223,050) $ 167,000 402,000 633,000 710,000 522,000 999,000 $ 3,433,000 $(1,109,950) (300,000) (500,000) (300,000) (1,223,050) $(3,433,000) $ (165,250) $ (819,000) (165,250) 5,000 $ (979, 250) $ 20,600 291,000 342,000 419,000 419,000 $ 1,491,680 $ (382,350) @ (100,000) (30,000) (979,250) $(1,491,600) On the date of acquisition, Aaron reported retained earnings of $470,000 and a total book value of $600,000. At that time, its royalty agreements were undervalued by $60,000. This intangible was assumed to have a six- year remaining life with no residual value. Additionally, Aaron owned a trademark with a fair value of $50,000 and a 10-year remaining life that was not reflected on its books. Aaron declared and paid dividends in the same period GIUU-CALICHOTY HIC MOL WUJ TIULICHCLICU VIL . DUIVIT CLILICU U PUIU VIVIUCIUS IVIC SUITE period. a. Using the preceding information, prepare a consolidation worksheet for these two companies as of December 31, 2018. b. Assuming that Michael applied the equity method to this investment, what account balances would differ on the parent's individual financial statements? Answer is not complete. Complete this question by entering your answers in the tabs below. Required A Required B Assuming that Michael applied the equity method to this investment, what account balances would differ on the parent individual financial statements? $ 150,250 Equity in Eamings of Aaron Retained Earnings 1/1/18 Investment in Aaron $ 1,337,000 $ 1,144,250 On January 1, 2017, Corgan Company acquired 70 percent of the outstanding voting stock of Smashing, Inc., for a total of $1,120,000 in cash and other consideration. At the acquisition date, Smashing had common stock of $830,000, retained earnings of $380,000, and a noncontrolling interest fair value of $480,000. Corgan attributed the excess of fair value over Smashing's book value to various covenants with a 20-year remaining ife. Corgan uses the equity method to account for its investment in Smashing. During the next two years, Smashing reported the following: Net Income 2017 $280,000 2018 260,000 Dividends Declared $48,000 58,000 Inventory Purchases from Corgan $230,000 250,000 Corgan sells inventory to Smashing using a 60 percent markup on cost. At the end of 2017 and 2018,30 percent of the current year purchases remain in Smashing's inventory. 1. Compute the equity method balance in Corgan's Investment in Smashing, Inc., account as of December 31, 2018. ). Prepare the worksheet adjustments for the December 31, 2018, consolidation of Corgan and Smashing, Answer is not complete. Complete this question by entering your answers in the tabs below. Required A Required B Prepare the worksheet adjustments for the December 31, 2018, consolidation of Corgan and Smashing. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) No Transaction Accounts Debit Credit 25,875 Investment in Smashing Cost of goods sold DI 25,875 2 N 830,000 612,000 Common stock - Smashing Retained earnings - Smashing Investment in Smashing Noncontrolling interest 1,009,400 432,600 3 3 370,500 Covenants Investment in Smashing Noncontrolling interest 259,350 111,150 166,100 Equity in earnings of Smashing Investment in Smashing 166,100 5 5 40,600 Investment in Smashing Dividends declared 40,600 6 6 19,500 Amortization expense Covenants 19,500 7 7 250,000 Sales Cost of goods sold 250,000 B 8 28.125 Cost of goods sold Inventory O 28,125