On January 1, 2019, Calloway Corporation exchanged $2,880,000 cash for 100 percent of the outstanding voting stock of Murray Corporation. On the acquisition date, Murray had the following balance sheet.

Cash $ 109,800 Accounts Payable $ 337,500

Accounts Receivable 254,700 Long-Term Debt 2,389,500

Inventory 315,000 Common Stock 1,350,000

Buildings (net) 1,687,500 Retained Earnings 990,000

Licensing Contracts 2,700,000

Total Assets $ 5,067,000 Total Liabilities and Owners' Equity $ 5,067,000

On the acquisition date: Murrays buildings had a fair market value of $1,957,500 and a remaining useful life of 10 years; and its licensing contracts had a fair market value of $2,610,000 and were due to expire in 5 years. At December 31, 2020 Murrays accounts payable included a $76,500 current liability owed to Calloway. Calloway employs the initial value method of accounting for a subsidiary investment. The respective financial records for Calloway and Murray for the year ended December 31, 2020 are as follows:

CallowayMurray

Income Statement:

Sales $ (6,300,000) $ (2,700,000)

Cost of Goods Sold 4,185,000 1,530,000

Interest Expense 229,500 144,000

Depreciation Expense 526,500 315,000

Amortization Expense - 540,000

Dividend Income (45,000) -

Net Income $ (1,404,000) $ (171,000)

Statement of Retained Earnings:

Retained Earnings, beginning $ (4,500,000) $ (1,215,000)

Net Income (1,404,000) (171,000)

Dividends 504,000 45,000

Retained Earnings, ending $ (5,400,000) $ (1,341,000)

Balance Sheet:

Cash $ 389,700 $ 148,500

Accounts Receivable 1,089,000 180,000

Inventory 1,111,500 1,350,000

Investment in Subsidiary 2,880,000 -

Buildings (net) 5,014,800 1,836,000

Licensing Contracts - 1,620,000

Goodwill 315,000 -

Total Assets $ 10,800,000 $ 5,134,500

Accounts Payable $ (270,000) $ (643,500)

Long-Term Debt (2,430,000) (1,800,000)

Common Stock (2,700,000) (1,350,000)

Retained Earnings (5,400,000) (1,341,000)

Total Liabilities and Owners' Equity $ (10,800,000) $ (5,134,500)

Required: In section 1a, prepare the consolidating journal entries on the worksheet (according to Hoyle et al.) for December 31, 2020

	Calloway	Murray	Debit	Credit	Consolidated Totals
Income Statement:
Sales	$ (6,300,000)	$ (2,700,000)
Cost of Goods Sold	4,185,000	1,530,000
Interest Expense	229,500	144,000
Depreciation Expense	526,500	315,000	[ Select ]
Amortization Expense	-	540,000		[ Select ] [
Dividend Income	(45,000)	-	[ Select ]
Net Income	$ (1,404,000)	$ (171,000)
Statement of Retained Earnings:
Retained Earnings, beginning	$ (4,500,000)	$ (1,215,000)	[ Select ]	[ Select ]
Net Income	(1,404,000)	(171,000)
Dividends	504,000	45,000		[ Select ]
Retained Earnings, ending	$ (5,400,000)	$ (1,341,000)
Balance Sheet:
Cash	$ 389,700	$ 148,500
Accounts Receivable	1,089,000	180,000		[ Select ]
Inventory	1,111,500	1,350,000
Investment in Subsidiary	2,880,000	-	[ Select ]	[ Select ]
				[ Select ]
Buildings (net)	5,014,800	1,836,000	[ Select ]	[ Select ]
Licensing Contracts	-	1,620,000	[ Select ]	[ Select ]
Goodwill	315,000	-	[ Select ]
Total Assets	$ 10,800,000	$ 5,134,500
Accounts Payable	$ (270,000)	$ (643,500)	[ Select ]
Long-Term Debt	(2,430,000)	(1,800,000)
Common Stock	(2,700,000)	(1,350,000)	[ Select ]
Retained Earnings	(5,400,000)	(1,341,000)
Total Liabilities and Owners' Equity	$ (10,800,000)	$ (5,134,500)

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