Please assist in completing and correcting some mistakes I have made.
Following are separate financial statements of Michael Company and Aaron Company as of December 31, 2021 (credit balances Indicated by parentheses). Michael acquired all of Aaron's outstanding voting stock on January 1, 2017, by Issuing 20,000 shares of its own $1 par common stock. On the acquisition date, Michael Company's stock actively traded at $30.50 per share. Aaron Company 12/31/21 $ (390,880) 150,000 110,000 Revenues Cost of goods sold Amortization expense Dividend income Net income Retained earnings, 1/1/21 Net income (above) Dividends declared Retained earnings, 12/31/21 Cash Receivables Inventory Investment in Aaron Company Copyrights Royalty agreements Total assets Liabilities Preferred stock Common stock Additional paid-in capital Retained earnings, 12/31/21 Total liabilities and equity Michael Company 12/31/21 $ (640,000) 285,888 121,500 (5,880) $ (238,500) $ (922,880) (238,580) 90,000 $(1,070,500) $ 167,000 398,888 588,888 610,000 555,800 975,888 $ 3,293,000 $(1,122,500) (388,880) (588,880) (300,000) (1,070,500) $(3,293,880) $ (130,000) $ (686,880) (130,880) 5,880 $ (811,800) $ 22,988 282,888 293,888 397,880 412,000 $ 1,406,900 $ (465,980) @ (188,888) (30,880) (811,880) $(1,406,980) On the date of acquisition, Aaron reported retained earnings of $370,000 and a total book value of $500,000. At that time, its royalty agreements were undervalued by $60,000. This Intangible was assumed to have a six-year remaining life with no residual value. Additionally, Aaron owned a trademark with a fair value of $50,000 and a 10-year remaining life that was not reflected on its books. Aaron declared and paid dividends in the same period. a. Using the preceding Information, prepare a consolidation worksheet for these two companies as of December 31, 2021. b. Assuming that Michael applied the equity method to this Investment, what would the following account balances be on the parent's Individual financial statements? MICHAEL COMPANY AND CONSOLIDATED SUBSIDIARY Consolidation Worksheet For Year Ending December 31, 2021 Consolidation Entries Accounts Michael Aaron Debit Credit S S Revenues Cost of goods sold Amortization expense Dividend income Net income (640,000) 285,000 121,500 (5,000) (238,500) (390,000) 150,000 110,000 0 (130,000) Consolidated Totals 1,030,000 435,000 246,500 0 $ 348,500 15,000 5,000 $ S 0 Retained earning, 1/1/21 (Michael) Retained earning, 1/1/21 (Aaron) Net income (above) Dividends declared Retained earnings, 12/31/21 (922,000) 0 (238,500) 90,000 $ (1,070,500) 0 (686,000) (130,000) 5,000 (811,000) IS 348,500 90,000 5,000 $ S S S 22.900 282,000 293,000 189,900 680,000 881,000 Cash Receivables Inventory Investment in Aaron Co. Copyrights Royalty agreements Trademark 167,000 398,000 588,000 610,000 555,000 975,000 0 397,000 412.000 0 20,000 30,000 10,000 5,000 952,000 1,397,000 25,000 0 Total assets S 3,293,000 S 1,406,900 Liabilities Preferred stock Common stock Additional paid-in capital Retained earnings, 12/31/21 (above) Total liabilities and equity 100,000 (1,122,500) (300,000) (500,000) (300,000) (1,070,500) $ (3,293,000) S (465,900) 0 (100,000) (30,000) (811,000) $ (1,406,900) 1,588,400 300,000 500,000 300,000 30,000 S 200,000 IS 20,000 Assuming that Michael applied the equity method to this investment, what would the following account balances be on the parent's individual financial statements? Amounts $ 259,500 Equity in Earnings of Aaron 12/31/21 Retained earnings, 1/1/21 Investment in Aaron 12/31/21 Retained earnings, 12/31/21
