Punch Corporation paid $16,200 for a 90% interest in Shock Corporation on January 1, 2013, when Swamp stockholders' equity consisted of $10,000 Capital Stock and $3,000 of Retained Earnings. The excess cost over book value was attributable to goodwill.

Additional information:

1. Punch sells merchandise to Shock at 120% of Pollek's cost. During 2013, Punch's sales to Shock were $4,800, of which half of the merchandise remained in Shock's inventory at December 31, 2013. (The 2013 ending inventory was sold in 2014.) During 2014, Punch's sales to Shock's were $6,000 of which 60% remained in Shock's inventory at December 31, 2014. At year-end 2014, Shock owed Punch $1,500 for the inventory purchased during 2014.

2. Punch Corporation sold equipment with a book value of $2,000 and a remaining useful life of four years and no salvage value to Shock Corporation on January 1, 2014 for $2,800. Straight-line depreciation is used.

3. During 2014, Shock sold to Punch land for $50,000 that had a book value of $20,000. Punch still owns the land at 12/31/14.

4. Separate company financial statements for Punch Corporation and Subsidiary at December 31, 2014 are summarized in the first two columns of the consolidation working papers. See Spreadsheet Tab.

5. The following information is available for 2013:

Shock's income $4,000

Shock's dividends received by Punch $1,800

INCOME STATEMENT	P	S	ELIMINATIONS		CONS.TOT.
FYE 12/31/14			dr cr
Sales	60,000	14,000			74,000
Equity in sub earnings	4,600				4,600
gain on sale of equip	800				800
Gain on sale of land		30,000			30,000
Total revenues	65,400	44,000			109,400
Cost of goods sold	26,000	4,400			30,400
Expenses	28,000	3,600			31,600
Total expenses	54,000	8,000			62,000
Total Net income	11,400	36,000			47,400
Less net income to NCI					0
Net income to controlling interest	11,400	36,000			47,400
RETAINED EARNINGS
STATEMENT
Retained Earnings 1/1	9,500	5,000			14,500
Net income	11,400	36,000			47,400
Dividends declared	7,000	2,000			9,000
Retained Earnings 12/31	13,900	39,000			52,900
BALANCE SHEET
cash	5,500	33,000			38,500
accts rec	7,000	4,000			11,000
Dividends rec					0
Inventory	10,000	4,500			14,500
Other current assets					0
Land	50,000	3,500			53,500
Buildings, net					0
Equipment, net	24,000	9,000			33,000
Investment in S	20,400				20,400
gw					0
					0
					0
Total assets	116,900	54,000			170,900
Accounts payable	53,000	5,000			58,000
Dividends payable					0
Other liabilities					0
Common stock	50,000	10,000			60,000
Paid in capital					0
Retained earnings	13,900	39,000			52,900
noncontrolling interest					0
Total liabilities and equity	116,900	54,000	0	0	170,900

Required: Carefully Follow and label each step.

1. Prepare the acquisition analysis as of acquisition date. Compute the

unamortized differential as of 1/1/2013.

2. Analyze each intercompany transaction. Label as either upstream

downstream.

3. Calculate Net income to the controlling interest for the year 2014

4. Verify the calculation of the balance in the account equity in sub

earnings and record the parent company entries with respect to its investment during 2014

5. Prepare all elimination entries for 2014

6. Complete the consolidating spreadsheet for the year ended 2014.