Through the payment of $11,900,000 in cash, Smith Company acquires voting control over Jones Company. This price is paid for 80 percent of Jones' 100,000 outstanding common shares (no par value) as well as all 10,000 shares of 6 percent, cumulative, $100 par value preferred stock.

Of the total payment, $3.8 million is attributed to the fully participating preferred stock with the remainder paid for the common. This acquisition is carried out on January 1, 2016, when Jones reports retained earnings of $7.5 million and a total book value of $13.7 million.

The acquisition-date fair value of the non-controlling interest in Jones' common stock was $2,025,000. On this same date, a building owned by Jones (with a 5-year remaining life) is undervalued in the financial records by $175,000, while equipment with a 10-year remaining life is overvalued by $100,000.

Any further excess acquisition-date fair value is assigned to a brand name with a 12-year remaining life. During 2016, Jones reports net income of $1,125,000 while declaring $360,000 in cash dividends. Smith uses the initial value method to account for both of these investments.

Required: Prepare appropriate consolidation entries for 2016.