On January 1, 2017, Prestige Corporation acquired 100 percent of the voting stock of Stylene Corporation in exchange for $2,361,000 in cash and securities. On the acquisition date, Stylene had the following balance sheet:

At the acquisition date, the book values of Stylenes assets and liabilities were generally equivalent to their fair values except for the following assets:

Based upon the fair value of consideration transferred ($2,361,000) and the book value of Stylene on the acquisition date ($1,730,000), the fair value in excess of book value was $631,000.

During the next two years, Stylene has the following income and dividends in its own separately prepared financial reports to its parent.

Prestige accounts for this investment under the full equity method of accounting. The Investment in Stylene account balance at December 31, 2018 is determined as follows:

Dividends are declared and paid in the same period. The December 31, 2018, separate financial statements for each company appear below. Parentheses indicate credit balances.

A. Show how Prestige determined its December 31, 2018, Investment in Stylene balance.

B. Prepare a five column workpaper that shows the consolidated values to be reported on Prestiges financial statements as of December 31, 2018. Note this is the end of the second year after the acquisition occurred. You should have multiple consolidation entriesS, A, I, D, and E.

Accounts payable $ 1,556,600 Cash Accounts receivable Inventory Equipment (net) Trademarks $ 30, 600 103,000 197,000 2,070,000 886,000 $ 3, 286,600 Common stock Retained earnings 800,000 930,000 $ 3,286,600 Asset Equipment Customer lists Trademarks Book Value $ 2,070,000 0 886,000 Fair Value $ 2,220,000 248,000 938,000 Remaining Useful Life 8 years 4 years indefinite $2,361,000 1,730,000 631,000 Fair Value of Consideration Transferred Book Value Excess Fair Value over Book Value Allocation to Identifiable Net Assets: Equipment Customer Lists Trademarks Difference Goodwill $150,000 248,000 52,000 450,000 $181,000 2017 2018 Net Income Dividends $ 228,000 $ 25,000 366,000 45,000 Fair Value at 1/1/17 Add: Post-acquisition earnings Less: Amortizations from acquisition date Less: Dividends Investment in Stylene 12/31/18 $2,361,000 594,000 (161,500) (70,000) $2,723,500 Prestige Stylene $ (4,500,000) 2,450,000 551,000 202,000 (285,250) (1,582,250) $ (2,550,000) 1,800,000 384,000 0 0 $ $ (366,000) $ Income Statement Revenues Cost of goods sold Depreciation expense Amortization expense Equity earnings in Stylene Net income Statement of Retained Earnings Retained earnings 1/1 Net income (above) Dividends declared Retained earnings 12/31 Balance Sheet Cash Accounts receivable Inventory Investment in Stylene Equipment Customer lists Trademarks Goodwill (3,460,000) (1,582,250) 150,000 (4,892,250) $ (1,133,000) (366,000) 45,000 $ (1,454,000) $ $ 512,000 00 938,000 2,723,500 6,860,000 197,000 2,930,000 205,000 $ 15,171,500 $ (1,779,250) (8,500,000) (4,892,250) $ (15,171,500) $ 65,000 84,500 492,000 0 1,650,000 0 946,000 0 $ 3,237,500 $ (983,500) (800,000) (1,454,000) $ (3,237,500) Total assets Accounts payable Common stock Retained earnings, 12/31 Total liabilities and equity