On January 1, 2012, Pickle Corporation exchanged $3,200,000 cash for 100 percent of the outstanding voting stock of Sausage Corporation. Pickle plans to maintain Sausage as a wholly owned subsidiary with separate legal status and accounting information systems.At the acquisition date, Pickle prepared the following fair-value allocation schedule:Fair value of Sausage (consideration transferred) 3,608,000 Book value of net assets acquired 2,965,000 Excess of cost over fair value 643,000 to buildings (undervalued) 266,000 to licensing agreements (overvalued) (97,000)net 169,000 to goodwill (indefinite life) 474,000

On the acquisition date, Sausage had the following balance sheet:

Accounts Sausage

Cash 159,000

Accounts receivable 308,000

Inventory 434,000

Buildings (net) 2,000,000

Licensing agreements 3,200,000

Goodwill 0

Total assets 6,101,000

Accounts payable (376,000)

Long-term debt (2,760,000)

Common stock (1,500,000)

Retained earnings (1,465,000)

Total liabilities and equities. (6,101,000)

At the acquisition date, Sausage's buildings had a 10-year remaining life and its licensing agreements were due to expire in 5 years. Sausage Corporation continues its separate legal existence as a wholly owned subsidiary of Pickle with independent accounting records. Pickle employs the cost method in its internal accounting for its investment in Sasuage.

The separate financial statements for the two companies for the year ending 31 December 2013.

The separate financial statements for the two companies for the year ending 31 December 2013, follow. Credit balances are indicated by parentheses. Question 1: Prepare a consolidation worksheet to consolidate the financial information for these two companies. Accounts Pickle Sausage NOTE DEBIT NOTE CREDIT Consolidated Sales (7,617,000) (3,189,000) COGS 4,725,000 1,770,000 Interest expense 347,000 215,000 Depreciation expense 680,000 368,000 Amortization expense 640,000 Dividend Income (55,000) Net Income (1,920,000) (196,000) Retained Earnings, 1 JAN 2013 Net Income Dividends paid Retained Earnings, 31 DEC 2013 (5,390,000) (1,920,000) 400,000 (6,910,000) (1,791,200) (196,000) 55,000 (1,932,200) 414,500 1,665,000 1,335,000 3,608,000 517,700 235,000 1,630,000 Cash Accounts receivable Inventory Investment in Sausage Investment in Sausage Buildings (net) Licensing agreements Goodwill Total assets 5,715,000 2,217,000 1,920,000 592,500 13,330,000 6,519,700 16.870.300 HINT: Total assets should equal this amount Accounts payable Long-term debt Common stock Retained earnings, 31 DEC Total liabilities and equities (360,000) (3,060,000) (3,000,000) (6,910,000) (13,330,000) (807,500) (2,280,000) (1,500,000) (1,932,200) (6,519,700) Question 2. Compute the following amounts that would appear on Pickles's 2013 separate (nonconsolidated) financial records if Pickle's investment accounting was based on the equity method. Subsidiary (Sausage) income Retained Earnings, 1 JAN 2013 Investment in Sausage The separate financial statements for the two companies for the year ending 31 December 2013, follow. Credit balances are indicated by parentheses. Question 1: Prepare a consolidation worksheet to consolidate the financial information for these two companies. Accounts Pickle Sausage NOTE DEBIT NOTE CREDIT Consolidated Sales (7,617,000) (3,189,000) COGS 4,725,000 1,770,000 Interest expense 347,000 215,000 Depreciation expense 680,000 368,000 Amortization expense 640,000 Dividend Income (55,000) Net Income (1,920,000) (196,000) Retained Earnings, 1 JAN 2013 Net Income Dividends paid Retained Earnings, 31 DEC 2013 (5,390,000) (1,920,000) 400,000 (6,910,000) (1,791,200) (196,000) 55,000 (1,932,200) 414,500 1,665,000 1,335,000 3,608,000 517,700 235,000 1,630,000 Cash Accounts receivable Inventory Investment in Sausage Investment in Sausage Buildings (net) Licensing agreements Goodwill Total assets 5,715,000 2,217,000 1,920,000 592,500 13,330,000 6,519,700 16.870.300 HINT: Total assets should equal this amount Accounts payable Long-term debt Common stock Retained earnings, 31 DEC Total liabilities and equities (360,000) (3,060,000) (3,000,000) (6,910,000) (13,330,000) (807,500) (2,280,000) (1,500,000) (1,932,200) (6,519,700) Question 2. Compute the following amounts that would appear on Pickles's 2013 separate (nonconsolidated) financial records if Pickle's investment accounting was based on the equity method. Subsidiary (Sausage) income Retained Earnings, 1 JAN 2013 Investment in Sausage