On January 1, 2014, DeSpain Company acquired Lawrence Corporation, a company that manufactures small medical parts. DeSpain paid $440,000 cash in exchange for 80% of Lawrences common stock. On the date of acquisition, Lawrence had the following balance sheet:

Lawrence Corporation Balance Sheet January 1, 2014

Assets

Accounts Receivable 82,000

Inventory 40,000

Land 60,000

Buildings 200,000 Accumulated Depreciation (50,000)

Equipment 100,000 Accumulated Depreciation (30,000)

Total Assets 402,000

Liabilities and Equity

Current Liabilities90,000

Bonds Payable100,000

Common Stock ($1 par) 10,000

PaidinCapital in excess of par 90,000

Retained Earnings 112,000

Total Liabilities and Equity 402,000

At the time of the acquisition, the fair value of Lawrences Corporation based on the market value of Lawrences stock was $550,000. DeSpain Company requested that an appraisal be done to determine whether the book value of Lawrences net assets reflect their fair values. Appraisal values for identifiable assets and liabilities are as follows:

Accounts Receivable 82,000

Inventory (sold during 2014) 38,000

Land150,000

Building (20year life) 280,000

Equipment (5year life) 100,000

Current Liabilities90,000

Bonds Payable (5year life) 96,000

Any remaining excess is attributed to goodwill.

DeSpain Company uses the equity method to account for its investment in Lawrence Corporation. DeSpain Company and Lawrence Corporation have the following trial balances on December 31, 2016:

DeSpain Lawrence

Cash138,000 110,000

Accounts Receivable90,000 55,000

Inventory120,000 86,000

Land100,000 60,000

Investment in Lawrence444,080 0

Buildings800,000 250,000

Accumulated Depreciation (220,000) (80,000)

Equipment 150,000 100,000

Accumulated Depreciation(90,000) (72,000)

Current Liabilities (60,000) (102,000)

Bonds Payable0 (100,000)

Common Stock (100,000) (10,000)

PaidinCapital in excess of Par (900,000) (90,000)

Retained Earnings, January 1, 2016 (309,720) (182,000)

Sales(800,000) (350,000)

Cost of Goods Sold 450,000 210,000

Depreciation Expense Buildings 30,000 15,000

Depreciation Expense Equipment 15,000 14,000

Other Expenses140,000 68,000

Interest Expense0 8,000

Subsidiary Income(17,360) 0

Dividends Declared 20,000 10,000

Totals 0 0

Required:1) Prepare a value analysis and a determination and distribution of excess schedule for the investment in Lawrence Corporation as of January 1, 2014. Prepare any additional schedules if required.

2) Prepare consolidation entries (S,A,I,D,E) for DeSpain Company for the year ended December 31, 2016.