Naomi Corporation acquired $75\%$ of the outstanding stock of Winnie, Inc., on January $1,2019,$ for $$1,530,000$ in cash. The remaining $25\%$ of Winnie$$s stock traded actively at the same price as Naomi paid. The book value of Winne, Inc. at acquisition date was $$1,340,000.$ One of Winnie$$s buildings, with a $16-$year remaining life, was undervalued in the company$$s accounting records by $$160,000.$ Also, Winnie$$s newly developed patent, with an estimated $10-$year life, was assessed to have a fair value of $$395,000.$ During subsequent years, Winnie reports the following:

Net Income Dividends

$2019$ $$210,000$ $ $80,000$

$2020$ $$235,000$ $$100,000$

$2021$ $$285,000$ $$110,000$

The financial results for December $31,2022$ are listed below for the two companies.

Naomi Winnie

BV BV

$12/31/202212/31/2022$

Revenues $($$$879,000)($$$525,000)$

Operating expenses $450,000200,000$

Investment income $(206,625)0$

Net income $($$$635,625)($$$325,000)$

Retained earnings, $1/1/22($$$2,240,000)($$$1,330,000)$

Net income $(635,625)(325,000)$

Dividends declared $245,000120,000$

Retained earnings $12/31/22($$$2,630,625)($$$1,535,000)$

Current assets $$1,605,625$ $$975,000$

Investment in subsidiary $1,865,2500$

Land $670,000435,000$

Buildings $($net$)835,000600,000$

Equipment $($net$)350,000175,000$

Total assets $$5,325,875$ $$2,185,000$

Liabilities $($$$285,000)($$$200,000)$

Common stock $(750,000)(40,000)$

Additional paid$-$in$-$capital $(1,660,250)(410,000)$

Retained earnings $(2,630,625)(1,535,000)$

Total Liabilities & equities $($$$5,325,875)($$$2,185,000)$

Required $(25$ points$)$

a$.$ Prepare a consolidation worksheet for this business combination.

b$.$ Prepare the consolidating entry $*$C$$ that would have been required if Naomi had used the initial value method for accounting for its investment in Winnie.

c$.$ Prepare the consolidating entry $*$C$$ that would have been required if Naomi had used the partial equity method for accounting for its investment in Winnie.