Mami SA contributes $170,000 cash and Nasrin Company brings in net assets valued at $170,000 to form Mazda Inc. Mami, SA and Nasrin Company each receive 50 percent equity interest in Mazda Inc. The financial statements of Mazda Inc. for its first year of operations are as follows:

Mazda Inc.

Income Statement

YEAR 1

______________________________________________________________________________

Revenues $80,000

Expenses 50,000

________

Income before tax 30,000

Tax Expense 10,000

________

Net Income $20,000

________

Mazda Inc.

Balance Sheet

December 31, Year 1

______________________________________________________________________________

Cash $40,000 Liabilities $60,000

Inventory 60,000

Property, Plant, and Common Stock 340,000

Equipment (net) 320,000 Retained Earnings 20,000

_________ ________

Total Assets $420,000 $420,000

_________ ________

Mami SAs financial statements for the year ended December 31, Year 1 and before making any accounting entries related to its investment in Mazda, Inc., are as follows:

Mami SA

Income Statement for Year 1

______________________________________________________________________________

Revenues $800,000

Expenses 450,000

________

Income before tax 350,000

Tax Expense 100,000

________

Net Income $250,000

________

Mami SA

Balance Sheet for the year ended on December 31, Year 1

______________________________________________________________________________

Cash $130,000 Liabilities $250,000

Inventory 200,000

Property, Plant, and Common Stock 600,000

Equipment (net) 650,000 Retained Earnings 300,000

Investment in

Mazda Inc. (at cost) 170,000

___________ __________

Total Assets $1,150,000 $1,150,000

___________ __________

Restate Mami, SAs Year 1 financial statements to properly account for its investment in Mazda Inc. under the proportionate consolidation method and equity method.