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 $31.00 per share. Revenues Cost of goods sold Amortization expenso 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 $ Michael Company 12/31/18 $ (742,000) 336,000 125,100 (5,000) (285,900) (932,000) (285,900) 90.000 $(1,127,900) 114,000 477,000 590,000 620,000 476,000 1.005.000 $ 3,282,000 $(1,054, 100) (300,000) (500,000) (300,000) (1,127,900) Aaron Conpany 12/31/18 $ (466,500) 188,250 121,000 0 (157,250) (734,000) (157,250) 5,000 $ (886,250) $ 23,300 268,000 340,000 371,000 447,000 $ 1,449,300 (433,050) (100,000) (30,000) (886,250) Check my work 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 $(1,127,900) $ 114,000 477,000 590,000 620,000 476,000 1,005,000 $ 3,282,000 $(1,054,100) (300,000) (500,000) (300,000) (1,127,900) $ (3,282,000) $ (886,250) $ 23,300 268,000 340,000 0 371,000 447,000 $ 1,449,300 $ (433,050) 0 (100,000) (30,000) (886,250) $(1,449,300) On the date of acquisition, Aaron reported retained earnings of $380,000 and a total book value of $510,000. 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 financial statements? Accounts Revenues Cost of goods sold Amortization expense Dividend income Net income MICHAEL COMPANY AND CONSOLIDATED SUBSIDIARY Consolidation Worksheet For Year Ending December 31, 2018 Consolidation Entries Michael Aaron Debit Credit $ (742,000) $ (466,500) 336,000 188,250 125,100 121,000 15,000 (5,000) 0 5,000 $ (285,900) $ (157,250) Consolidated Totals (1,208,500) 524,250 261,100 0 (423,150) > (932,000) 0 275,000 0 734,000 0 Retained earnings, 1/1 (Michael) Retained earnings, 1/1 (Aaron) Net income (above) Dividends declared Retained earnings, 12/31 $ (285,900) 90,000 $ (1,127,900) (734,000) (157,250) 5,000 (886,250) 5,000 (423,150) 90,000 (333,150) $ $ ---- Dividends declared 90,000 $ (1,127,900) 5,000 Retained earnings, 12/31 5,000 (886,250) $ 90,000 (333,150) Cash $ s $ 23,300 268,000 340,000 137,300 745,000 0 Receivables Inventory Investment in Aaron Co. Copyrights Royalty agreements Trademark Total assets 114,000 477,000 590,000 620,000 476,000 1,005,000 0 3,282,000 371,000 447,000 0 1,449,300 $ $ $ 882,300 Liabilities Preferred stock Common stock Additional paid-in capital Retained earnings, 12/31 (above) Total liabilities and equity $ (1,054,100) (300,000) (500,000) (300,000) (1,127,900) $ (3,282,000) $ (433,050) 0 (100,000) (30,000) (886,250) $ (1,449,300) (333,150) (333,150) s 754,000 $ 280,000 $ Complete this question by entering your answers in the tabs belo Required A Required B Assuming that Michael applied the equity method to this investment, what individual financial statements? Retained Earnings, 1/1/18 Investment in Aaron Equity in Earnings of Aaron