On January 1, 2025, P Corporation acquired 100 percent of the voting stock of S Corporation in exchange for $2,347,500 in cash and securities. On the acquisition date, S had the following balance sheet:

Cash	$	24,800	Accounts payable	$	1,891,800
Accounts receivable		102,000
Inventory		223,000
Equipment (net)		2,310,000	Common stock		800,000
Trademarks		920,000	Retained earnings		888,000
Total assets	$	3,579,800	Total liabilities and equity	$	3,579,800

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

Asset	Book Value		Fair Value		Remaining Useful Life
Equipment	$	2,310,000	$	2,483,000	8 years
Customer lists		0		234,000	4 years
Trademarks		920,000		1,009,500	indefinite

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

	Net Income		Dividends
2025	$	240,000	$	25,000
2026		238,000		45,000

Dividends are declared and paid in the same period. The December 31, 2026, separate financial statements for each company follow. Parentheses indicate credit balances.

	P				S
Income Statement
Revenues	$	(4,780,000	)		$	(2,326,000	)
Cost of goods sold		2,590,000				1,640,000
Depreciation expense		552,000				448,000
Amortization expense		116,000				0
Equity earnings in S		(157,875	)			0
Net income	$	(1,679,875	)		$	(238,000	)
Statement of Retained Earnings
Retained earnings 1/1	$	(3,570,000	)		$	(1,103,000	)
Net income (above)		(1,679,875	)			(238,000	)
Dividends declared		150,000				45,000
Retained earnings 12/31	$	(5,099,875	)		$	(1,296,000	)
Balance Sheet
Cash	$	542,000			$	52,500
Accounts receivable		736,000				101,000
Inventory		929,000				558,000
Investment in S		2,595,250				0
Equipment		6,010,000				1,740,000
Customer lists		168,000				0
Trademarks		3,150,000				994,000
Goodwill		260,000				0
Total assets	$	14,390,250			$	3,445,500
Accounts payable	$	(790,375	)		$	(1,349,500	)
Common stock		(8,500,000	)			(800,000	)
Retained earnings, 12/31		(5,099,875	)			(1,296,000	)
Total liabilities and equity	$	(14,390,250	)		$	(3,445,500	)

FAIR VALUE IN EXCESS OF BOOK VALUE: 659,500

FAIR VALUE: 2,347,500

POST ACQUISITION EARNINGS LESS EXCESS AMORTIZATION 317,750

S DIVIDENDS SINCE ACQUISITION 70,000

INVESTMENT IN S 2,595,250

1. Prepare a worksheet to determine the balances for P's December 31, 2026, consolidated financial statements.

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