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)3,608,000Book value of net assets acquired2,965,000Excess of cost over fair value643,000to buildings (undervalued)266,000to licensing agreements (overvalued)(97,000)net169,000to 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 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) (10,806,000) COGS 4,725,000 1,770,000 6,495,000 Interest expense 347,000 215,000 562,000 Depreciation expense 680,000 368,000 D 26,600 1,074,600 Amortization expense 640,000 D 19,400 659,400 Dividend Income (55,000) C 55,000 Net Income (1,920,000) (196,000) (2,015,000) Retained Earnings, 1 JAN 2013 (5,390,000) (1,791,200) E 1,791,200 ADJ 357,800 (5,747,800) Net Income (1,920,000) (196,000) Dividends paid (2,015,000) ABOVE 400,000 55,000 C 55,000 400,000 Retained Earnings, 31 DEC 2013 (6,910,000) (1,932,200) (7,362,800) 7,362,800 Cash 414,500 517,700 932,200 Accounts receivable 1,665,000 235,000 1,900,000 Inventory 1,335,000 1,630,000 2,965,000 Investment in Sausage 3,608,000 ADJ 357,800 E 3,291,200 674,600 Investment in Sausage A 791,000 (791,000 Buildings (net) 5,715,000 2,217,000 A 239,400 D 26,600 8,144,800 Licensing agreements 1,920,000 A 77,600 D 19,400 1,978,200 Goodwill 592,500 A 474,000 1,066,500 Total assets 13,330,000 6,519,700 16,870,300 HINT: Total assets should equal this amount. Accounts payable (360,000) (807,500) (1,167,500) Long-term debt (3,060,000) (2,280,000) (5,340,000) Common stock (3,000,000) (1,500,000) E 1,500,000 (3,000,000) Retained earnings, 31 DEC (6,910,000) (1,932,200) (7,362,800) 7362800 Total liabilities and equities (13,330,000) (6,519,700) 4,541,000 4,541,000 (16,870,300)