P acquires S on 12/31 by issuing 26,000 shares of $10 par value common stock valued at $100/share. P pays fees of $40,000 to a third party for its assistance in arranging the transaction. P promises to pay an additional $83,200 to the former owners if S's earnings exceed $300,000 during the next annual period. P estimates a 25% probability that the $83,200 contingent payment will be required. A discount rate of 4% (to represent the time value of money) yields an expected present value of $20,000 for the contingent liability. P & S independently maintain incorporation. Prepare the consolidation worksheet based on the following financial information of both P&S on 12/31, the acquisition date.

Accounts	P BV - 12/31	S BV - 12/31	S FV - 12/31
Current Assets	1.100,000	300,000	300,000
Computers & Software (net)	1,300,000	400,000	600,000
Capitalized Software (net)	500,000	100,000	1,200,000
Customer Contracts	0	0	700,000
Notes Payable	(300,000)	(200,000)	(250,000)
Net Assets	2,600,000	600,000	2,550,000
Common Stock, $10 par value	(1,600,000)	0	0
Common Stock, $5 par value	0	(100,000)	(100,000)
Additional Paid-in-Capital	(40,000)	(20,000)
Retained Earnings, 1/1	(870,000)	(370,000)
Dividends declared	110,000	10,000
Revenues	(1,000,000)	(500,000)
Expenses	800,000	380,000
Stockholder's equity, 12/31	(2,600,000)	(600,000)
Retained Earnings, 12/31	(960,000)*	(480,000)*

*Retained earnings numbers are the balances after closing our revenues, expenses, and dividends. Parentheses indicate a credit balance.

Consolidation Worksheet

Accounts	P	S	Consolidation Entries - DR	Consolidation Entries - CR	Consolidation Totals
Income Statement
Revenues	(1,000,000)
Expenses	840,000*
Net Income	(160,000)
Statement of Retained Earnings
Retained Earnings, 1/1	(870,000)
Net Income (above)	(160,000)*
Dividends Declared	110,000
Retained Earnings, 12/31	(920,000)
Balance Sheet
Current Assets	1,060,000*	300,000
Investment in S	2,620,000	0
Computers & Equipment	1,300,000	400,000
Capitalized Software	500,000	100,000
Customer Contracts	0	0
Goodwill	0	0
Total Assets	5,480,000	800,000
Notes Payable	(300,000)	(200,000)
Contingent Performance Liability	(20,000)*
Common Stock	(1,860,000)*	(100,000)
APIC	(2,380,000)*	(20,000)
Retained Earnings, 12/31 (above)	(920,000)*	(480,000)
Total Liabilities & Equity	(5,480,000)	(800,000)