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Mason Corporation purchased 85% of the common stock of Hudson Company for cash of $10,676,850 on January 1, 2015 when Hudsons stockholders equity consisted of

Mason Corporation purchased 85% of the common stock of Hudson Company for cash of $10,676,850 on January 1, 2015 when Hudsons stockholders equity consisted of $1,000,000 of common stock and $10,000,000 of retained earnings. The fair value of the noncontrolling interest at that date was 1,884,150. All of Hudsons assets and liabilities had equal fair values and book values except for inventory which had book value $170,000 in excess of fair valueand the assets and liabilities in the table below that had fair values in excess of book values for the indicated amounts. The inventory was sold in 2015, and the land had not been sold by the end of 2016 which is the current year. The remaining useful lives and maturities of the others assets and liabilities are indicated in the table below:

Asset/Liability

Excess of Fair Value over Book Value

Remaining Life/Term at Acquisition1/1/15

Land

$39,000

Unknown

Notes Receivable

50,000

5 years

Copyrights

812,000

7 years

Buildings

280,000

4 years

Equipment

300,000

10 years

Bonds Payable

350000

7 years

Hudsons 2015 net income was $1,300,000, and it declared and paid $300,000 of dividends.

Masons Investment in Hudson had a December 31, 2015 balance of $11,521,750.

Hudsons December 31, 2016 accounts payable included $83,000 payable to Mason.

The December 31, 2016 preclosing trial balances for Mason and for Hudson are provided in the worksheet.

Problem 1Prepare all equity method entries required for Mason for 2015 and 2016

Problem 2Prepare all consolidation entries required to derive the information necessary to report the consolidated entity for 2015 and for 2016.

Here is the trial balance information

Trial Balances at December 31, 2016
Mason Corporation Hudson Company
Item Debit Credit Debit Credit
Cash $ 28,289,000 $ 2,145,200
Accounts Receivable 33,000,000 4,000,000
Notes Receivable 4,800,000
Investment in Hudson 13,293,150 -
Held-to-Maturity Securities 14,000,000
Inventory 4,300,000 1,500,000
Land 1,650,000 500,000
Buildings 16,000,000 8,600,000
Equipment 8,350,000 5,000,000
Copyrights 600,000
Cost of Goods Sold 48,000,000 14,907,000
Depreciation Expense--Buildings & Equipment 2,900,000 953,000
Amortization Expense 200,000
Other Operating Expenses 370,000 3,172,800
Interest Expense 2,150,000 680,000
Dividends 3,250,000 240,000
Allowance for Doubtful Accounts 2,750,000 325,000
Accumulated Depreciation--Buildings 11,200,000 2,200,000
Accumulated Depreciation--Equipment 3,600,000 1,180,000
Accounts Payable 3,680,000 1,180,200
Bonds Payable 22,500,000 8,000,000
Common Stock 6,600,000 1,000,000
Additional Paid-in Capital 41,083,500
Retained Earnings 22,163,250 11,000,000
Sales 60,000,000 22,000,000
Income from Hudson 1,975,400 -
Interest Revenue - 412,800
Totals $ 175,552,150 $ 175,552,150 $ 47,298,000 $ 47,298,000

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