On January 1, 2017, Travers Company acquired 90 percent of Yarrow Company's outstanding stock for $837,000. The 10 percent noncontrolling interest had an assessed fair value of $93,000 on that date. Any acquisition-date excess fair value over book value was attributed to an unrecorded customer list developed by Yarrow with a remaining life of 15 years. On the same date, Yarrow acquired an 80 percent interest in Stookey Company for $448,000. At the acquisition date, the 20 percent noncontrolling interest fair value was $112,000. Any excess fair value was attributed to a fully amortized copyright that had a remaining life of 10 years. Although both investments are accounted for using the initial value method, neither Yarrow nor Stookey have distributed dividends since the acquisition date. Travers has a policy to declare and pay cash dividends each year equal to 40 percent of its separate company operating earnings. Reported income totals for 2017 follow: $ 430,000 Travers Company Yarrow Company Stookey Company 225,000 172,000 Following are the 2018 financial statements for these three companies. Stookey has transferred numerous amounts of inventory to Yarrow since the takeover amounting to $106,000 (2017) and $132,500 (2018). These transactions include the same markup applicable to Stookey's outside sales. In each year, Yarrow carried 20 percent of this inventory into the succeeding year before disposing of it. An effective tax rate of 40 percent is applicable to all companies. All dividend declarations are paid in the same period. Travers Yarrow Stookey Company S (526,000) 315,600 105, 200 $ (105, 200) $ (417,000) (105, 200) Company $(1,030,000) 548,900 114,300 $ (366,800) $ (830,000) (366,800) Company $ (700,100) Sales Cost of goods sold Operating expenses 373,300 93,000 $ (233,800) $ (701,400) (233,800) Net income Retained earnings, 1/1/18 Net income (above) Dividends declared 146,720 $ (935, 200) $ (522, 200) $(1,050,080) Retained earnings, 12/31/18 523,300 837,000 Current assets 443,700 352,700 Investment in Yarrow Company Investment in Stookey Company Land, buildings, and equipment (net) 448,000 862,000 $ 1,753,700 (502,900) (315,600) (935, 200) 1,103, 700 $ 2,464,000 $ (913,920) (500,000) (1,050,080) 512, 200 864,900 $ (142,700) (200,000) (522,200) Total assets Liabilities Common stock Retained earnings, 12/31/18 $ (864,900) $(2,464,000) $(1,753,700) Total liabilities and equities Note: Parentheses indicate a credit balance. a. Prepare the business combination's 2018 consolidation worksheet; ignore income tax effects. b. Determine the amount of income tax for Travers and Yarrow on a consolidated tax return for 2018. c. Determine the amount of Stookey's income tax on a separate tax return for 2018. d. Based on the answers to requirements (b) and (c), what journal entry does this combination make to record 2018 income tax? TRAVERS COMPANY AND CON SOLIDATED SUBSIDIARIES Consolidation Worksheet For Year Ending December 31, 2018 Noncontrolling Consolidated Consolidation Entries Travers Yarrow Stookey Company Interest Accounts Debit Credit Balance Company Company (1,030,000) Sales and other revenue (700,100) (526,000) Cost of goods sold 548,900 373,300 315,600 114,300 Operating expenses 93,000 105,200 (366,800) (233,800) (105,200) Separate company net income Consolidated net income Net income attributable to NCI (Yarrow) Net income attributable to NCI (Stookey) Net income attributable to Travers Company Retained earnings, 1/1/18: Travers Company (830,000) Yarrow Company (701.400) Stookey Company (417.000) Net income (above) (366,800) (233,800) (105,200) Dividends declared 148,720 (1,050,080) (935,200) (522,200) Retained earnings, 12/31/18 Current assets 523,300 443,700 352,700 Investment in Yarrow Company 837,000 Investment in Stookey Company 448,000 Land, buildings, & equipment (net) 1,103,700 862,000 512,200 Copyright Customer list 1,753,700 Total assets 2,464,000 884,900 Liabilities (913.920) (502,900) (142,700) (500,000) Common stock (315,600) (200,000) Retained earnings, 12/31/18 (above) (1.050.080) (935,200) (522,200) NCI interest in Stookey. 1/1/18 Noncontrolling interest in Yarrow, 1/1/18 Noncontrolling interests in subsidiaries Total liabilities and equities (2,484,000) (1,753,700) (864,900) b. Determine the amount of income tax for Travers and Yarrow on a consolidated tax return for 2018. c. Determine the amount of Stookey's income tax on a separate tax return for 2018. Income tax payable b. Income tax payable C. Based on the answers to requirements (b) and (c), what journal entry does this combination make to record 2018 income tax? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet Record the income tax payable. Note: Enter debits before credits. Transaction General Journal Debit Credit Record entry View general journal Clear entry On January 1, 2017, Travers Company acquired 90 percent of Yarrow Company's outstanding stock for $837,000. The 10 percent noncontrolling interest had an assessed fair value of $93,000 on that date. Any acquisition-date excess fair value over book value was attributed to an unrecorded customer list developed by Yarrow with a remaining life of 15 years. On the same date, Yarrow acquired an 80 percent interest in Stookey Company for $448,000. At the acquisition date, the 20 percent noncontrolling interest fair value was $112,000. Any excess fair value was attributed to a fully amortized copyright that had a remaining life of 10 years. Although both investments are accounted for using the initial value method, neither Yarrow nor Stookey have distributed dividends since the acquisition date. Travers has a policy to declare and pay cash dividends each year equal to 40 percent of its separate company operating earnings. Reported income totals for 2017 follow: $ 430,000 Travers Company Yarrow Company Stookey Company 225,000 172,000 Following are the 2018 financial statements for these three companies. Stookey has transferred numerous amounts of inventory to Yarrow since the takeover amounting to $106,000 (2017) and $132,500 (2018). These transactions include the same markup applicable to Stookey's outside sales. In each year, Yarrow carried 20 percent of this inventory into the succeeding year before disposing of it. An effective tax rate of 40 percent is applicable to all companies. All dividend declarations are paid in the same period. Travers Yarrow Stookey Company S (526,000) 315,600 105, 200 $ (105, 200) $ (417,000) (105, 200) Company $(1,030,000) 548,900 114,300 $ (366,800) $ (830,000) (366,800) Company $ (700,100) Sales Cost of goods sold Operating expenses 373,300 93,000 $ (233,800) $ (701,400) (233,800) Net income Retained earnings, 1/1/18 Net income (above) Dividends declared 146,720 $ (935, 200) $ (522, 200) $(1,050,080) Retained earnings, 12/31/18 523,300 837,000 Current assets 443,700 352,700 Investment in Yarrow Company Investment in Stookey Company Land, buildings, and equipment (net) 448,000 862,000 $ 1,753,700 (502,900) (315,600) (935, 200) 1,103, 700 $ 2,464,000 $ (913,920) (500,000) (1,050,080) 512, 200 864,900 $ (142,700) (200,000) (522,200) Total assets Liabilities Common stock Retained earnings, 12/31/18 $ (864,900) $(2,464,000) $(1,753,700) Total liabilities and equities Note: Parentheses indicate a credit balance. a. Prepare the business combination's 2018 consolidation worksheet; ignore income tax effects. b. Determine the amount of income tax for Travers and Yarrow on a consolidated tax return for 2018. c. Determine the amount of Stookey's income tax on a separate tax return for 2018. d. Based on the answers to requirements (b) and (c), what journal entry does this combination make to record 2018 income tax? TRAVERS COMPANY AND CON SOLIDATED SUBSIDIARIES Consolidation Worksheet For Year Ending December 31, 2018 Noncontrolling Consolidated Consolidation Entries Travers Yarrow Stookey Company Interest Accounts Debit Credit Balance Company Company (1,030,000) Sales and other revenue (700,100) (526,000) Cost of goods sold 548,900 373,300 315,600 114,300 Operating expenses 93,000 105,200 (366,800) (233,800) (105,200) Separate company net income Consolidated net income Net income attributable to NCI (Yarrow) Net income attributable to NCI (Stookey) Net income attributable to Travers Company Retained earnings, 1/1/18: Travers Company (830,000) Yarrow Company (701.400) Stookey Company (417.000) Net income (above) (366,800) (233,800) (105,200) Dividends declared 148,720 (1,050,080) (935,200) (522,200) Retained earnings, 12/31/18 Current assets 523,300 443,700 352,700 Investment in Yarrow Company 837,000 Investment in Stookey Company 448,000 Land, buildings, & equipment (net) 1,103,700 862,000 512,200 Copyright Customer list 1,753,700 Total assets 2,464,000 884,900 Liabilities (913.920) (502,900) (142,700) (500,000) Common stock (315,600) (200,000) Retained earnings, 12/31/18 (above) (1.050.080) (935,200) (522,200) NCI interest in Stookey. 1/1/18 Noncontrolling interest in Yarrow, 1/1/18 Noncontrolling interests in subsidiaries Total liabilities and equities (2,484,000) (1,753,700) (864,900) b. Determine the amount of income tax for Travers and Yarrow on a consolidated tax return for 2018. c. Determine the amount of Stookey's income tax on a separate tax return for 2018. Income tax payable b. Income tax payable C. Based on the answers to requirements (b) and (c), what journal entry does this combination make to record 2018 income tax? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet Record the income tax payable. Note: Enter debits before credits. Transaction General Journal Debit Credit Record entry View general journal Clear entry