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Matthews Co. obtained ninety percent of the common stock of Jackson Co. on January 1, 2016. As of that date, Jackson had the following balances,

Matthews Co. obtained ninety percent of the common stock of Jackson Co. on January 1, 2016. As of that date, Jackson had the following balances, and fair values, on some of its accounts:

Cost Fair value

Additional paid-in capital 60,000

Buildings net (10 year remaining useful life) 140,000 188,000

Common stock 300,000

Equipment net (8 year remaining useful life) 240,000 216,000

Inventory 110,000 130,000

Land 90,000 120,000

Long-term liabilities (mature 12/31/2018) 180,000 160,000

Patent (10 year remaining useful life ) 0 72,000

During 2017 (2016), Jackson reported net income of $132,000 ($96,000) while paying dividends of $36,000 ($12,000). The retained earnings were $300,000 at the end of 2017.

Matthews Co. acquired the common stock of Jackson Co. for $585,000 in cash and incurred legal and accounting fees of $40,000 in respect of the merger. Matthews uses the equity method to account for this investment.

Required:

Prepare the consolidation journal entries for December 31, 2017.

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