On January 1, 2014, Plant Company purchased 80% of the common stock of Sun Company for $775,000.

Sun reported the following:

2014 2015 2016

Income $350,000 $360,000 $325,000

Dividends$45,000 $55,000 $65,000

Sun Sun

Plant (Book) (Market)

Cash $1,650,000 $515,000 $515,000

Accounts rec 400,000. 190,000. 190,000

Inventory. 600,000. 125,000. 125,000

Land 900,000 100,000 150,000

Total $3,550,000. $930,000 $980,000

Liabilities. $0 $200,000 $230,000

Common 500,000 300,000

Addtl PIC. 250,000 100,000

Retained 2,800,000 330,000

$3,550,000. $930,000

Required:1.Assume that Plant accounts for the acquisition using the Equity method. Use the information above as well as theincomplete worksheet information presented on the following pages to consolidate the financial statements for Plant and Sun for 2014, 2015 & 2016.

In working the consolidations, please provide the following information:

1.The Equity method entries that Plant would make each year

2.The Allocation Schedule to allocate excess fair values

3.The consolidation entries

4.The Completed worksheets showing the consolidated totals

Assume that Plant accounts for the acquisition using the Initial Value method (i.e., the Cost method). Use the information above as well as the appropriate incomplete worksheet information to consolidate the financial statements for Plant and Sun for 2014, 2015 and 2016. Please provide all the same information as #1 above.

Note:If no journal entry is required, please indicate that "no journal entry" is needed.NOTE:Please do notamortize Liability and do not adjust the interest expense associated with the undervalued liability.Only undervalued or overvalued assets need the annual amortization. However, you still need to allocated the excess FV to the liability by the same amount every year.Check Figurestotal consolidated assets 2014:$ 5,161,750. 2015:$ 5,879,750. 2016:$6,180,750

WORKSHEETS:

Pre-consolidation Worksheet 12/31/2014 Trial Balances Plant Sun DR CR Totals FV Allocation Schedule INCOME STATEMENT Net sales 800,000 650,000 350,000 Cost of sales 410,000 250,000 Other expenses 215,000 50,000 Equity Income 280,000 Consolidated NI 455,000 350,000 To NCI To Controlling Interest STATEMENT OF RETAINED EARNINGS Retained earnings, 1/1/2014 2,800,000 330,000 5-Stockholder's Equity NI 455,000 350,000 Divs 50,000 45,000 End RE 3,205,000 635,000 BALANCE SHEET Cash 1,433,000 735,000 Accounts receivable net 425,000 230,000 A-Allocations Inventory 800,000 270,000 Land 900,000 100,000 Goodwill Equity Investment 1,019,000 I-Income Elimination Total Assets 4,577,000 1,335,000 Liabilities 622,000 300,000 Common stock 500,000 300,000 Other paid in capital 250,000 100,000 Retained Earnings 3,205,000 635,000 D-Dividend Elimination NCI-Equity Total L +E 4,577,000 1,335,000 E-Expense AllocationFV Allocation Schedule Pre-consolidation worksheet 12/31/2015 Trial Balances Plant Sun DR CR Totals INCOME STATEMENT Net sales 785,000 684,000 Cost of sales 362,000 287,000 Other expenses 218,000 37,000 Equity Income 288,000 Consolidated NI 493,000 360,000 To NCI To Controlling Interest 5-Stockholder's Equity Elimination STATEMENT OF RETAINED EARNINGS Retained earnings, 1/1/15 3,205,000 635,000 NI 493,000 360,000 Divs 70,000 55,000 End RE 3,628,000 940.000 BALANCE SHE A-Allocations Cash 2,000,000 968,000 Accounts receivable net 442,000 310,000 Inventory 683,000 208,000 Land 900,000 100,000 Goodwill Equity Investment 1,263,0 I-Income Elimination [ Total Assets 5,288,000 Liabilities 910,000 246,000 Common stock 500,000 300,000 D-Dividend Elimination Other paid in capital 250,000 100,000 Retained Earnings 3,628,000 940,000 NCI-Equity Total L +E 5,288,000Pre-consolidation worksheet 12/31/2016 Trial Balances Plant Sun DR CR Totals INCOME STATEMENT Net sales 785,000 656,000 Cost of sales 362,000 292,000 Other expenses 218,000 39,000 Equity Income 260,000 Consolidated NI 465,000 325,000 To NCI To Controlling Interest S-Stockholder's Equity Elimination STATEMENT OF RETAINED EARNINGS Retained earnings, January 1 940,000 NI 465,000 325,000 Divs 70,000 65,000 End RE 1,200,000 BALANCE SHEET A-Allocations Cash 985,000 Accounts receivable net 421,000 400,000 Inventory 610,000 250,000 Land 100,000 Goodwill Equity Investment I-Income Elimination Total Assets 1,735,000 Liabilities 875,000 135,000 Common stock 500,000 300,000 D-Dividend Elimination Other paid in capital 250,000 100,000 Retained Earnings 1,200,000 NCI-Equity E - Expense Allocation Total L +E 1,735,00012/31/14 Trial Balances Eliminations & Adjustments Consolidated Cost Method Entries Plant Co. Plant Sun Debit Credit Balance Sheet INCOME STATEMENT Net sales 800,000 650,000 Cost of sales 410,000 250,000 Other expenses 215,000 50,000 Dividend Income 36,000 FV Allocation Consolidated NI 211,000 350,000 To NCI To Controlling Interest STATEMENT OF RETAINED EARNINGS Retained earnings, January 1 2,800,000 330,000 NI 211,000 350,000 Divs 50,000 45,000 C* - Convert to Equity End RE 2,961,000 635,000 BALANCE SHEET Cast 1,433,000 735,000 Accounts receivable net 425,000 230,000 Inventory 800,000 270,000 S - Stockholder's Equity Land 900,000 100,000 Goodwill Investment in Sun 775,000 Total Assets 1,333,000 1,335,000 Liabilities 622,000 300,000 A-Allocations Common stock 500,000 300,000 Other paid in capital 250,000 100,000 Retained Earnings 2,961,000 635,000 NC I - Income Elimination Total L +E 1,333,000 1,335,000 D - Div EliminationFV Allocation 12/31/15 Trial Balances Eliminations & Adjustments Consolidated Plant Sun Debit Credit Balance Sheet NCOME STATEMENT Net sales 785,000 684,000 Cost of sales 362,000 287,000 Other expenses 218,000 37,000 Div Income 44,000 Consolidated NI 249,000 360,000 To NCI To Controlling Interest Total Consolidated Net Income STATEMENT OF RETAINED EARNINGS C* - Convert to Equity Retained earnings, January 1 635,000 249,000 360,000 Dive 70,000 55,000 S-Stockholder's Equity End RE 940,000 BALANCE SHEET Cash 968,000 Accounts receivable net 442,000 310,000 Inventory 683,000 208,000 Land 900,000 100,000 A - Allocations Goodwill Investment in Sun 775,000 Total Assets Liabilities 910,000 246,000 Common stock 500,000 300,000 I - Income Elimination Other paid in capital 250,000 100,000 Retained Earnings 940,000 NCI D- Div Elimination Total L +E E - Expense AllocationFV Allocation 12/31/16 Trial Balances Eliminations & Adjustments Consolidated Plan Sun Debit Credit Balance Sheet INCOME STATEMENT Net sales 785,000 656,000 Cost of sales 362,000 292,000 Other expenses 218,000 39,000 Dividend Income 52,000 Consolidated NI 257,000 325,000 To NCI To Controlling Interest Total Consolidated Net Income STATEMENT OF RETAINED EARNINGS C* - Convert to Equity Retained earnings, January 1 3,140,000 940,000 NI 257,000 325,000 Divs 70,000 65,000 S-Stockholder's Equity End RE 3,327,000 1,200,000 BALANCE SHEET Cash 1,946,000 985,000 Accounts receivable net 421,000 400,000 Inventory 610,000 250,000 Land 1,200,000 100,000 A - Allocations Goodwill Investment in Sun 775,000 Total Assets 1,952,000 1,735,000 I - Income Elimination Liabilities 875,000 135,000 Common stock 500,000 300,000 Other paid in capital 250,000 100,000 Retained Earnings 3,327,000 1,200,000 NC D- Div Elimination Total L +E 4,952,000 1,735,000 E - Expense Allocation