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 Aarons outstanding voting stock on January 1, 2014, by issuing 20,000 shares of its own $1 par common stock. On the acquisition date, Michael Companys stock actively traded at $26 per share.

	Michael Company 12/31/18				Aaron Company 12/31/18
Revenues	$	(727,000	)		$	(427,500	)
Cost of goods sold		328,500				168,750
Amortization expense		119,700				119,500
Dividend income		(5,000	)			0
Net income	$	(283,800	)		$	(139,250	)
Retained earnings, 1/1/18	$	(902,000	)		$	(601,000	)
Net income (above)		(283,800	)			(139,250	)
Dividends declared		90,000				5,000
Retained earnings, 12/31/18	$	(1,095,800	)		$	(735,250	)
Cash	$	144,000			$	15,200
Receivables		422,000				302,000
Inventory		583,000				360,000
Investment in Aaron Company		510,000				0
Copyrights		479,000				432,000
Royalty agreements		951,000				388,000
Total assets	$	3,089,000			$	1,497,200
Liabilities	$	(893,200	)		$	(631,950	)
Preferred stock		(300,000	)			0
Common stock		(500,000	)			(100,000	)
Additional paid-in capital		(300,000	)			(30,000	)
Retained earnings, 12/31/18		(1,095,800	)			(735,250	)
Total liabilities and equity	$	(3,089,000	)		$	(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.

1. a. Using the preceding information, prepare a consolidation worksheet for these two companies as of December 31, 2018.

Using the preceding information, prepare a 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.)

1. b. Assuming that Michael applied the equity method to this investment, what account balances would differ on the parent's individual financial statements?

Assuming that Michael applied the equity method to this investment, what account balances would differ on the parent's individual financial statements?

equity in earnings of Araon _______

investment in Araon _______

Retatined earnings 1/1/2018 _______