On January, 1, 2010, Porter Company purchased an 80% interest in the capital stock of Salem Company for $850,000. At that time, Salem Company had capital stock of $550,000 and retained earnings of $80,000. Difference between the fair value and the book value of the identifiable assets of Salem Company were as follows: Equipment $130,000 Land $65,000 Inventory $40,000 The book values of all other assets and liabilities of Salem Company were equal to their fair values on January 1, 2010. The equipment had a remaining life of five years on January 2, 1010. The inventory was sold in 2010. Salem Companys net income and dividends declared in 2010 and 2011 were as follows: Year 2010 Net Income of $100,000; Dividends Declared of $25,000 Year 2011 Net Income of $110,000; Dividends Declared of $35,000 A. Prepare a Computation and Allocation Schedule for the difference between book value of equity required and the value implied b y the purchase price. B. Present the eliminating/adjusting entries needed on the consolidated worksheet for the year ended December 31, 2010. (It is not necessary to prepare the worksheet.) 1. Assume the use of the cost method. 2. Assume the use of the partial equity method. 3. Assume the use of the complete equity method. C. Present the eliminating/adjusting entries needed on the consolidated worksheet fo the year ended December 31, 2011. (It is not necessary to prepare the worksheet.) 1. Assume the use of the cost method. 2. Assume the use of the partial equity method. 3. Assume the use of the complete equity method. Use the following financial data for 2012 for requirement D through G. Porter Company Salem Company Sales 1,100,000 450,000 Dividend Income 48,000 Total revenue 1,148,000 450,000 Cost of goods sold 900,000 200,000 Depreciation expense 40,000 30,000 Other expenses 60,000 50,000 Total cost and expense 1,000,000 280,000 Net income 148,000 170,000 1/1 Retained earnings 500,000 230,000 Net income 148,000 170,000 Dividends declared (90,000) (60,000) 12/31 Retained earnings 558,000 340,000 Cash 70,000 65,000 Accounts receivable 260,000 190,000 Inventory 240,000 175,000 Investment in Salem Company 850,000 Land 0 320,000 Plant and equipment 360,000 280,000 Total assets 1,780,000 1,030,000 Accounts payable 132,000 110,000 Notes payable 90,000 30,000 Capital stock 1,000,000 550,000 Retained earnings 558,000 340,000 Total liabilities and equity 1,780,000 1,030,000 D. Prepare a consolidated financial statements workpaper for the year ended December 31,2012. Although no goodwill impairment was reflected at the end of 2010 or 2011, the goodwill impairment test conducted at Decembe 31,2012 revealed implied goodwill from Salem to be only $150,000. The impairment has not been recorded in the books of the parent. (Hint: You can infer the method being used by the parent from the information in it trial balance.) E. Prepare a consolidated statement of financial position and a consolidated income statement for the year ended December 31, 2012. F. Describe the effect on the consolidated balances if Salem Company uses the LIFO cost flow assumption in pricing its inventory and there has been no decrease in ending inventory quantities since 2010. G. Prepare an analytical calculation of consolidated retained earnings for the year ended December 31, 2012