Since its 100% acquisition of Dancer Corporation stock on December 31, 2012, Jones Corporation has maintained its investment under the equity method. However, due to Dancers earning potential, the price included a $40,000 payment for goodwill. At the time of the purchase, the fair value of Dancers assets equaled their book value.

On January 2, 2014, Dancer Corporation issued 10-year, 7% bonds at a face value of $50,000. The bonds pay interest each December 31. On January 2, 2016, Jones Corporation purchased all of Dancer Corporations outstanding bonds for $48,000. The discount is amortized on a straight-line basis. They have been included in Joness long-term investment in bonds account. Below are the trial balances of both companies on December 31, 2016.

	Jones Corporation	Dancer Corporation
Cash	70,500	67,500
Accounts Receivable	450,000	75,000
Inventory	200,000	65,000
Investment in Bonds	48,250
Plant and Equipment (net)	2,420,000	196,000
Investment in Dancer Corporation	350,000
Accounts Payable	(275,000)	(18,000)
Bonds Payable (7%)		(50,000)
Common Stock ($10 par)Jones	(1,000,000)
Paid-In Capital in Excess of ParJones	(750,000)
Retained Earnings, January 1, 2016Jones	(730,000)
Common Stock ($10 par)Dancer		(100,000)
Paid-In Capital in Excess of ParDancer		(130,000)
Retained Earnings, January 1, 2016Dancer		(80,000)
Sales	(2,500,000)	(540,000)
Cost of Goods Sold	1,000,000	405,000
Other Expenses	720,000	106,000
Interest Income	(3,750)
Interest Expense	0	3,500
Totals	0	0

1. Prepare the worksheet entries needed to eliminate the intercompany debt on December 31, 2016.

2. Prepare a consolidated income statement for the year ended December 31, 2016.

Note: No worksheet is required.