On January 1, 2010, Apple Company acquired 7596 of the outstanding common stock of Orange Company for $600,000 in cash. On the date of the acquisition, the fair value of the 2596 noncontrolling interest in the Orange Company was $200,000. The book value of Orange Company's net assets on January 1, 2010, was $500,000 and consisted of common stock of $150,000 and retained earnings of $350,000. Some of Orange Company assets were internally developed and were not reported on its books or had fair value that differed from it carrying value on the date of the acquisition as follows: Book Values Fair Values Patented Technologies (10 years of 50,000 150,000 remaining life) Customer List (5 years of 75,000 remaining life) Any remaining excess acquisition-date fair value was assigned to goodwill. Since acquisition, Apple has not had any goodwill impairments. -0- Intra-entity inventory sales between the two companies have been made as follows: Year Cost to Apple 130,000 2010 Transfer Price to Orange 180,000 210,000 Ending Balance(at transfer price) 45,000 70,000 | 2011 150,000 Presented below are the financial statements for these two companies as of December 31, 2011, prepared from their separately maintained accounting systems. Credit balances are indicated by parentheses. APPLE COMPANY AND CONSOLIDATED ORANGE SUBSIDIARY Consolidation Worksheet For Year Ending December 31, 2011 Apple Orange Company Company 12/31/2011 12/31/2011 $ (950,000) $ (480,000) 550,000 280,000 Consolidation Entries Noncontrolling Consolidated Debit Credit Interest Totals Sales Cost of goods sold 110,000 Operating Expense Income from Orange Company 210,000 (41,250) $ (231,250) $ (90,000) Separate Company Net income Consolidated Net Income To noncontrolling interest To parent company Retained earnings, 1/1/11 Net income Dividends paid Retained earnings, 12/31/11 $ (770,000) $ (231,250) 90,000 $ (911,250) $ (450,000) (90,000) 40,000 (500,000) $ $ Cash and Receivables Inventory Investment in Orange Company 310,000 375,000 655,000 105,000 255,000 112,000 266,000 307,000 222,000 40,000 Equipment (net) Building (net) Patent (net) Customer List Goodwill Total assets $ 1,913,000 $ 734,000 Liabilities Common stock Noncontrolling Interest 1/1/11 $ (401,750) $ (600,000) (84,000) (150,000) Noncontrolling Interest 12/31/11 Retained earnings, 12/31/11 Total liabilities and equities (911,250) $(1,913,000) $ (500,000) (734,000) On December 31, 2011, under the Partial Equity method the "Investment in Orange Company" account on the parent separate accounting records should be: 655,000 0 0 600,000 0 712.500 None of the answers is correct