On January 1, 2015, Palmer Company acquires an 80% interest in Stevens Company at cost of $4, 000, 000. at purchase date, Stevens Companys stockholdersequity consists as following:

Common stock - $2, 000, 000

Retained earning - $1, 000, 000

An examination of Stevens Com,panys assets and liabilities revealed the following:

Book value $ Fair value $

Current assets 600 000 600 000

Bonds 400 000 400 000

Inventory 400 000 200 000

Machinery 12 000 000 11 000 000 (net)

Accumulated deprecation - machinery (2 000 000)

Equipment 2 000 000 600 000 (net)

Accumulated deprecation - machinery (600 000)

Land 1 000 000 3 000 000

Stevens Companys machinery remaining useful life is 20 years and equipment remaining useful lise is 10 years. From inventory 80% was sold during 2015, rest of during 2016.

During year 2015 Palmer company sells merchandise to Stevens Company in value 1, 000, 000 (acquisition cost $880 000) and Stevens Company sells merchandise to Palmer Company in value $600, 00 (acquisition cost$300 000)

During year 2016 Palmer company sells mercandise to Stevens Company in value 1, 300, 000 and Stevens Company sells mercandise to Palmer Company in value $800 000. Sales gross margin was same as year 2015.

Unsold at year-end (consolidated) $ 2015 2016

Palmer Company 80 000 40 000

Stevens Company 100 000 60 00

Year-end unsold inventory was sold during next year.

On October 2, 2015, Stevens Company sold to Palmer Company machine what acquisition cost was $40, 000 with price $24, 000 (machine net value $20, 000). Machine remaining useful life is 5 years.

On March 1, 2016, Stevens Company sold to Palmers Company land with price $200, 000 (acquisition cost$100, 000)

With 31.12.16 Palmers comapany receivables includes Stevens Company debt is sum $20, 000.

Financial statement data with 31.12.2016 is following:

Palmers Company $ Stevens Company $

Cash 400 000 300 000

Receivables 600 000 500 000

Bonds 200 000 400 000

Inventory 600 000 500 000

Investment in Stevens Company 4 000 000

Machinery 20 000 000 12 000 000

Accumulated deprecation - machinery (10 000 000) (2 500 000)

Equipment 4 200 000 2 000 000

Accumulated deprecation - equipment (2 200 000) (740 000)

Land 800 000 900 000

Cost of sold goods 3 200 000 2 800 000

Deprecation 700 000 640 000

Other expenses 800 000 520 000

Dividends 240 000 140 000

TOTAL 23 540 000 17 460 000

Accounts payable 1 136 000 1 400 000

Long-term payables 1 680 000 8 200 000

Common stock 13 800 000 2 000 000

Sales 1 412 000 1 160 000

Gain from land sales 100 000

Dividends income 112 000

TOTAL 23 540 000 17 460 000

A. Prepare a Computation and Allocation Schedule for the difference between book value of equity acquired and the value implied by the purchase price.

B. Prepare eliminatgion transactions with 31.12.15

C. Prepare elimination transaction with 31.12.16

D. Prepare consolidation worksheet with 31.12.16 elimination entries and calculates consolidated financial statement with 31.12.16

PS! Accumulated deprecation must be presented on a separate row in the workpaper and in cosolidated statement of financial positions.