Through the payment of $10,468,000 in cash, Drexel Company acquires voting control over Young Company. This price is paid for 60 percent of the subsidiary's 100,000 outstanding common shares ($40 par value) as well as all 10,000 shares of 8 percent, cumulative, $100 par value preferred stock. Of the total payment, $3.1 million is attributed to the fully participating preferred stock with the remainder paid for the common. This acquisition is carried out on January 1, 2013, when Young reports retained earnings of $10 million and a total book value of $15 million. The acquisition-date fair value of the noncontrolling interest in Young's common stock was $4,912,000. On this same date, a building owned by Young (with a 5-year remaining life) is undervalued in the financial records by $200,000, while equipment with a 10-year life is overvalued by $100,000. Any further excess acquisition-date fair value is assigned to a brand name with a 20-year life.
During 2013, Young reports net income of $900,000 while paying $400,000 in cash dividends.
Drexel uses the initial value method to account for both of these investments.
Prepare appropriate consolidation entries for 2013.