EXAMPLE 2. The R Corp. purchased 100 percent of the outstanding stock of T Corp. on January 1, Year 1 for $175,000. As of that date the book value of the recorded assets of T Corp. was fairly shown on its books, except for a fully amortized patent which R Corp. was interested in. R Corp. paid more than the recorded value of T Corp. because this patent right was estimated to be worth $25,000 and to have four years of additional economic life to the consolidated group. For consolidation purposes it is necessary to recognize the value of this asset and also the annual amortization expense of $6,250 per year, assuming straight-line amortization. R Corp. and Subsidiary Worksheet Consolidated Income Statement Year 1 R Corp. T Corp. Eliminations Consolidated Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Sales.. 120,000 116,000 Cost of Goods Sold 70,000 75,000 Selling Expenses 16,000 12,000 General Expenses 15,000 9,000 Amortization of Patent a)6250 Dividend Income 10,000 Net Income-R Net Income T 101,000 130,000 96,000 116,000 29,000 20,000 130.000 130.000 116,000 116,000 R Corp. and Subsidiary Worksheet Consolidated Balance Sheet December 31, Year 1 2)6250 R Corp. T Corp. Eliminations Consolidated Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Current Assets 78,000 85,000 Investment in T 175,000 Depreciable Assets-net 190,000 90,000 Land 25,000 Patent a) 25,000 b.)6250 Liabilities 40,000 Capital Stock-R 169.000 200,000 Retained Earnings (Jan. 1)-R 60,000 Net Income-R 29,000 Dividends-R 15,000 Capital Stock-T Retained Earnings (Jan. 1)-T 100,000 50,000 b)6250 Net Income T 20,000 Dividends-T 10,000 Appraisal Capital-T 458,000 458,000 210,000 210,000 a)25,000