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 $25.50 per share. Aaron Company 12/31/18 $ (427,500) 168,750 119,500 Revenues Cost of goods sold Amortization expense Dividend income 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 $ (727,000) 328,500 119,700 (5,000) $ (283, 800) $ (902,000) (283,800) 90,000 $(1,095, 800) $ 144,000 422,000 583,000 510,000 479,000 951,000 $ 3,089,000 $ (893,200) (300,000) (500,000) (300,000) (1,095, 800) $(3,089,000) $ (139, 250) $ (601,000) (139,250) 5,000 $ (735,250) 15, 200 302,000 360,000 0 432,000 388.000 $ 1,497,200 $ (631,950) 0 (100,000) (30,000) (735,250) $(1,497,200) On the date of acquisition, Aaron reported retained earnings of $270,000 and a total book value of $400,000. 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, 2018. b. Assuming that Michael applied the equity method to this investment, what account balances would differ on the parent's individual b. Assuming that Michael applied the equity method to this investment, what account balances would differ on the parent's individual financial statements? Complete this question by entering your answers in the tabs below. Required A Required B Using the preceding information, prepare consolidation worksheet for these two companies as of December 31, 2018. (For accounts where multiple consolidation entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet. Amounts in the Debit and Credit columns should be entered as positive. Negative amounts for the Consolidated Totals column should be entered with a minus sign.) Show less Consolidated Accounts Totals MICHAEL COMPANY AND CONSOLIDATED SUBSIDIARY Consolidation Worksheet For Year Ending December 31, 2018 Consolidation Entries Michael Aaron Debit Credit $ (727,000) $ (427,500) 328,500 168,750 119,700 119,500 (5,000) 0 $ (283,800) $ (139,250) Revenues Cost of goods sold Amortization expense Dividend income Net income (902,000) 0 0 Retained earnings, 1/1 (Michael) Retained earnings, 1/1 (Aaron) Net income (above) Dividends declared (283,800) 90,000 (601,000) (139,250) 5,000 (902,000) 0 0 Retained earnings, 1/1 (Michael) Retained earnings, 1/1 (Aaron) Net income (above) Dividends declared Retained earnings, 12/31 (283,800) 90,000 (1,095,800) (601,000) (139,250) 5,000 (735,250) $ $ Cash $ $ 15,200 144,000 422,000 Receivables 302,000 360,000 583,000 Inventory Investment in Aaron Co. 510,000 0 479,000 432,000 Copyrights Royalty agreements Trademark 951,000 388,000 0 0 Total assets 3,089,000 $ 1,497,200 Liabilities $ $ (631,950) Preferred stock 0 Common stock Additional paid-in capital Retained earnings, 12/31 (above) Total liabilities and equity (893,200) (300,000) (500,000) (300,000) (1,095,800) (3,089,000) (100,000) (30,000) (735,250) (1,497,200) $ $