Prepare schedules that show the calculations of the Investment in Short 12/31/24 account balances. Consideration transferred by Martin for Short Short's separate 2023 net income Excess copyright amortization 2023 intra-entity Ending Inventory profit deferral Short's adjusted 2023 net income Percentage owned by Martin Short's separate 2024 income Excess copyright amortization Intra-entity Beginning Inventory profit recognition Intra-entity Ending Inventory profit deferral Short's adjusted 2024 net income Percentage owned by Martin Investment in Short 12/31/24 $ 124,800 80% 80% SA 0 Prepare schedules that show the calculations of the Investment in Martin 12/31/24 account balances. Consideration transferred by Gomez for Martin Martin's separate 2023 net income Martin's share of Short's 2023 net income Martin's 2023 net income Excess licensing agreement amortization Martin's adjusted 2023 net income Percentage owned by Gomez Equity in earnings of Martin 2023 Martin's 2024 net income Excess licensing agreement amortization Martin's adjusted 2024 net income Percentage owned by Gomez Equity in earnings of Martin 2024 90% 90%
On January 1, 2023, Gomez Company acquired 90 percent of Martin Company’s outstanding stock for $756,720. The 10 percent noncontrolling interest had an assessed fair value of $84,080 on that date. Martin's acquisition-date book value consisted of $306,000 common stock and $446,000
Also on January 1, 2023, Martin acquired an 80 percent interest in Short Company for $351,800. At the acquisition date, the 20 percent noncontrolling interest fair value was $87,950. Short's acquisition-date book value consisted of $203,000 common stock and $183,000 retained earnings. Any excess fair value was attributed to a fully amortized copyright that had a remaining life of 5 years. Martin uses the equity method to account for its investment in Short. Reported separate net income (before inclusion of equity method income) totals for 2023 follow:
| Martin Company | $ 178,600 |
|---|---|
| Short Company | 124,800 |
The following are the 2024 financial statements for these three companies (credit balances indicated by parentheses). Short has transferred inventory to Martin since the takeover amounting to $76,000 (2023) and $86,000 (2024). These transactions include the same markup applicable to Short’s outside sales. In each year, Martin carried 20 percent of this inventory into the succeeding year before disposing of it. An effective tax rate of 21 percent is applicable to all companies. All dividend declarations are paid in the same period.
| Accounts | Gomez Company | Martin Company | Short Company |
|---|---|---|---|
| Sales | $ (1,008,000) | $ (627,000) | $ (560,000) |
| Cost of goods sold | 537,600 | 334,400 | 280,000 |
| Operating expenses | 112,006 | 152,200 | 168,000 |
| Equity income of Martin | (191,880) | 0 | 0 |
| Equity income of Short | 0 | (80,200) | 0 |
| Net income | $ (550,274) | $ (220,600) | $ (112,000) |
| Retained earnings, 1/1/24 | $ (966,274) | $ (714,680) | $ (330,000) |
| Net income (above) | (550,274) | (220,600) | (112,000) |
| Dividends declared | 131,000 | 0 | 0 |
| Retained earnings, 12/31/24 | $ (1,385,548) | $ (935,280) | $ (442,000) |
| Cash and receivables | $ 121,500 | $ 105,680 | $ 94,000 |
| Inventory | 115,000 | 213,000 | 198,000 |
| Investment in Martin Company | 1,179,324 | 0 | |
| Investment in Short Company | 0 | 517,160 | 0 |
| Land, buildings, and equipment (net) | 836,112 | 757,840 | 574,000 |
| Total assets | $ 2,281,324 | $ 1,593,680 | $ 866,000 |
| Liabilities | $ (383,776) | $ (352,400) | $ (212,000) |
| Common stock | (512,000) | (306,000) | (212,000) |
| Retained earnings, 12/31/24 | (1,385,548) | (935,280) | (442,000) |
| Total liabilities and equities | $ (2,281,324) | $ (1,593,680) | $ (866,000) |
Required:
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a1. Prepare schedules that show the calculations of the Investment in Short 12/31/24 account balances.
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a2. Prepare schedules that show the calculations of the Investment in Martin 12/31/24 account balances.
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b. Prepare the business combination’s 2024 consolidation worksheet; ignore income tax effects.
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