On January 1, 2017, Travers Company acquired 90 percent of Yarrow Company's outstanding stock for $765,000. The 10 percent noncontrolling interest had an assessed fair value of $85,000 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 $384,000. At the acquisition date, the 20 percent noncontrolling interest fair value was $96,000. 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:

Travers Company	$	350,000
Yarrow Company		185,000
Stookey Company		140,000

Following are the 2018 financial statements for these three companies. Stookey has transferred numerous amounts of inventory to Yarrow since the takeover amounting to $90,000 (2017) and $112,500 (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 Company				Yarrow Company				Stookey Company
Sales	$	(950,000	)		$	(638,500	)		$	(510,000	)
Cost of goods sold		506,500				340,500				306,000
Operating expenses		105,500				85,000				102,000
Net income	$	(338,000	)		$	(213,000	)		$	(102,000	)
Retained earnings, 1/1/18	$	(750,000	)		$	(639,000	)		$	(345,000	)
Net income (above)		(338,000	)			(213,000	)			(102,000	)
Dividends declared		135,200				0				0
Retained earnings, 12/31/18	$	(952,800	)		$	(852,000	)		$	(447,000	)
Current assets	$	474,500			$	404,500			$	336,700
Investment in Yarrow Company		765,000				0				0
Investment in Stookey Company		0				384,000				0
Land, buildings, and equipment (net)		1,008,500				846,000				517,000
Total assets	$	2,248,000			$	1,634,500			$	853,700
Liabilities	$	(795,200	)		$	(476,500	)		$	(206,700	)
Common stock		(500,000	)			(306,000	)			(200,000	)
Retained earnings, 12/31/18		(952,800	)			(852,000	)			(447,000	)
Total liabilities and equities	$	(2,248,000	)		$	(1,634,500	)		$	(853,700	)

Note: Parentheses indicate a credit balance.

1. Prepare the business combination's 2018 consolidation worksheet; ignore income tax effects.

2. Determine the amount of income tax for Travers and Yarrow on a consolidated tax return for 2018.

3. Determine the amount of Stookey's income tax on a separate tax return for 2018.

4. Based on the answers to requirements (b) and (c), what journal entry does this combination make to record 2018 income tax?

Req A Req B and C ReqD Prepare the business combination's 2018 consolidation worksheet; ignore income tax effects. (For accounts where multiple consolidation entries are required, all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter ti amount in the credit column of the worksheet. Amounts in the Debit and Credit columns should be entered as positive. Negative amounts for the Noncontrollin and Consolidated Totals columns should be entered with a minus sign. Round your answers to nearest whole dollar amount. ) Shc Accounts TRAVERS COMPANY AND CONSOLIDATED SUBSIDIARIES Consolidation Worksheet For Year Ending December 31, 2018 Consolidation Entries Noncontrolling Consolidated Travers Yarrow Stookey Debit Credit Interest Balance Company Company Company (950,000) (638,500) (510,000) 506,500 340,500 306.000 105,500 85,000 102.000 (338,000) (213,000) (102,000) 0 Sales and other revenue Cost of goods sold Operating expenses 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 Yarrow Company 0 (750,000) (639,000) (345,000) (102,000) (213,000) (338,000) 135,200 (952,800) 474,500 765,000 0 (852,000) 404,500 (447,000) 336.700 384,000 846,000 1,008,500 517,000 Stookey Company Net income (above) Dividends declared Retained earnings, 12/31/18 Current assets Investment in Yarrow Company Investment in Stookey Company Land, buildings, & equipment (net) Copyright Customer list Total assets Liabilities Common stock Retained earnings, 12/31/18 (above) NCI interest in Stookey, 1/1/18 Noncontrolling interest in Yarrow, 1/1/18 Noncontrolling interests in subsidiaries Total liabilities and equities 1,634,500 853,700 0 2,248,000 (795,200) (500,000) (952,800) (476,500) (306,000) (852,000) (206,700) (200,000) (447,000) (2,248,000) (1,634,500) (853,700) 0 0