Following are separate financial statements of Michael Company and Aaron Company as of December 31, 2021 (credit balances indicated by parentheses). Michael acquired all of Aaron's outstanding voting stock on January 1, 2017, by issuing 20,000 shares of its own $1 par common stock. On the acquisition date, Michael Company's stock actively traded at $34.50 per share. Michael Company Aaron Company 12/31/21 $ (635,500) 12/31/21 $ (469,500) 189,750 121,000 Revenues Cost of goods sold Amortization expense Dividend income Net income Retained earnings, 1/1/21- Net income (above) Dividends declared Cash Retained earnings, 12/31/21 Receivables Inventory Investment in Aaron Company Copyrights Royalty agreements Total assets Liabilities Preferred stock Common stock Additional paid-in capital Retained earnings, 12/31/21 Total liabilities and equity 5,000 282,750 131,100 (5,000) 0 $ (226,650) $ (158,750) $ (890,000) $ (795,000) (226,650) 90,000 (158,750) $(1,026,650) $ (948,750) 139,000 397,000 576,000 690,000 471,000 924,000 16,800 271,000 376,000 0 428,000 $ 3,197,000 (1,070,350) (300,000) 447,000 $1,538,800 (460,050) 0 (500,000) (100,000) (300,000) (1,026,650) (30,000)) (948,750) $(3,197,000) $(1,538,800) On the date of acquisition, Aaron reported retained earnings of $450,000 and a total book value of $580,000. 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. a. Using the preceding information, prepare a consolidation worksheet for these two companies as of December 31, 2021. b. Assuming that Michael applied the equity method to this investment, what would the following account balances be on the parent's Individual financial statements? MICHAEL COMPANY AND CONSOLIDATED SUBSIDIARY Consolidation Worksheet For Year Ending December 31, 2021 Consolidation Entries Consolidated Accounts Michael Aaron Debit Credit Totals Revenues Cost of goods sold Amortization expense Dividend income $ (635,500) $ (469,500) 282,750 189,750 131,100 121,000 (5,000) Net income $ (226,650) $ (158,750) Retained earning, 1/1/21 (Michael) (890,000) Retained earning, 1/1/21 (Aaron) 0 (795,000) Net income (above) (226,650) (158,750) Dividends declared 90,000 5,000 Retained earnings, 12/31/21 $ (1,026,650) $ (948,750) Cash $ 139,000 $ 16,800 Receivables 397,000 271,000 Inventory 576,000 376,000 Investment in Aaron Co. 690,000 0 Copyrights 471,000 428,000 Royalty agreements 924,000 447,000 Trademark 0 0 Total assets $ 3,197,000 $ 1,538,800 Liabilities Preferred stock $ (1.070,350) $ (460,050) (300,000) 0 Common stock (500,000). (100,000) Additional paid-in capital (300,000) (30,000) Retained earnings, 12/31/21 (above) (1,026,650) (948,750) Total liabilities and equity $ (3,197,000) $ (1,538,800) $ 0 $ Required A Required B > Required A Required B Assuming that Michael applied the equity method to this investment, what would the following account balances be on the parent's individual financial statements? Equity in Earnings of Aaron 12/31/21 Retained eamings, 1/1/21 Amounts Investment in Aaron 12/31/21 Retained eamings, 12/31/21