Mighty Company purchased a 60 percent interest in Lowly Company on January 1, 2017, for $531,000 in cash. Lowly's book value at that date was reported as $750,000 and the fair value of the noncontrolling interest was assessed at $354,000. Any excess acquisition-date fair value over Lowly's book value is assigned to trademarks to be amortized over 20 years. Subsequently, on January 1, 2018, Lowly acquired a 20 percent interest in Mighty. The price of $300,000 was equivalent to 20 percent of Mighty's book and fair value.

Neither company has paid dividends since these acquisitions occurred. On January 1, 2018, Lowly's book value was $966,000, a figure that rises to $1,007,250 (common stock of $300,000 and retained earnings of $707,250) by year-end. Mighty's book value was $1.50 million at the beginning of 2018 and $1.60 million (common stock of $1 million and retained earnings of $600,000) at December 31, 2018. No intra-entity transactions have occurred and no additional stock has been sold. Each company applies the initial value method in accounting for the individual investments.

a.Prepare worksheet entries which are required to consolidate these two companies for 2018?

-Prepare Entry *C to accrue income to parent during the previous years as measured by the increase in book value and amortization expense for the previous year.

-Prepare Entry S1 to eliminate the subsidiary stockholders' equity accounts against the investment account and to recognize the noncontrolling interest ownership.

-Prepare Entry S2 to reclassify the cost of the parent shares as treasury stock.

-Prepare Entry A to recognize the unamortized portion of the acquisition-date excess fair value.

-Prepare Entry E to record trademarks amortization expense for 2018.

b.What is the net income attributable to the noncontrolling interest for this year?