On January $1,20$X$1,$ Diaz Corp. acquired all of the outstanding stock of Guled, Inc. for $$6,000,000.$ Guled, Inc. will continue to operate as a separate legal entity with independent accounting systems. At the acquisition date, Guled, Inc. had equity balances of $$300,000$ in common stock, $$500,000$ in additional$-$paid$-$in capital, and $$1,500,000$ in retained earnings. Diaz uses the equity method to account for their investment. As of the date of acquisition, all of Guled, Inc.$$s assets and liabilities equaled fair values with the exception of the following:

Remaining Useful Life

Account Book Value Fair Value

Equipment $$1,000,000$ $$3,100,0005$

Patents $100,0001,100,00010$

During $20$X$1$ and $20$X$2,$ Guled, Inc. reported the following totals for net income and dividend declarations:

Retained Earnings, January $1,20$X$1$: $$1,500,000$

$20$X$1$ Net Income $1,000,000$

$20$X$1$ Dividends $(120,000)$

Retained Earnings, December $31,20$X$12,380,000$

$20$X$2$ Net Income $1,400,000$

$20$X$2$ Dividends $(120,000)$

Retained Earnings, December $31,20$X$2$ $$3,660,000$

Requirement #$1$

Determine the balance of the $$Investment in Guled$$ reported on the balance sheet as of December $31,20$X$2$ in Diaz's internal accounting records. Show each item that impacts the $$Investment in Guled$$ balance as of December $31,20$X$2.$

Investment in Guled $6,000,000$

Share of Diaz Net income $-20111,000,000$

Share of Diaz Net income $-20121,400,000$

Share of Diaz dividends $(120,000)$

Share of Diaz dividends $(120,000)$

Fair Value adjustments $-$ Equipment $2,100,000$

Fair Value adjustments $-$ Patents $1,000,000$

Investment in Gulad $11,260,000$

Requirement #$2$

Record the consolidation$/$elimination entries necessary for consolidation purposes of Diaz and Guled for the year ended December $31,20$X$2.$

Account Description Debit Credit