Determine December 31, 2018, Investment in Company M balance.

Question

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Answer 1

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 3, Problem 25P

a.

To determine

Determine December 31, 2018, Investment in Company M balance.

a.

Expert Solution

Explanation of Solution

Investment in Company M balance:

Particulars		Amount
Consideration transferred		$ 5,875,000
Equity in Company M
2017 ($480,000 − $330,000)	$ 150,000
2018 ($900,000 − $330,000)	$ 630,000
Post-acquisition earnings		$ 780,000
Dividends of Company M		$ (75,000)
Investment balance on 31/12/2018		$ 6,580,000
Excess acquisition fair value:
Unpatented technology ($800,000 ÷ 8)		$ 100,000
Patents ($2,500,000 ÷ 10)		$ 250,000
Long term debt ($100,000 ÷ 5)		$ (20,000)
Annual amortization		$ 330,000

Table: (1)

b.

To determine

Prepare a worksheet to determine the consolidated values to be reported on Company A’s financial statements.

b.

Expert Solution

Explanation of Solution

Worksheet to determine the consolidated values to be reported on Company A’s financial statements:

Income statement	Company A	Company M	Debit($)	Credit($)	Consolidated Balances
Revenues	$ (6,400,000)	$ (3,900,000)			$ (10,300,000)
Cost of goods sold	$ 4,500,000	$ 2,500,000			$ 7,000,000
Depreciation expense	$ 875,000	$ 277,000			$ 1,152,000
Amortization expense	$ 430,000	$ 103,000	E 350,000		$ 883,000
Interest expense	$ 55,000	$ 60,000		E 20,000	$ 95,000
Equity earnings from Company M	$ (630,000)		I 630,000		$ -
Net income	$ (1,170,000)	$ (960,000)			$ (1,170,000)

Balance Sheet
Current assets	$ 75,000	$ 143,000			$ 218,000
Accounts receivable	$ 950,000	$ 225,000			$ 1,175,000
Inventories	$ 1,700,000	$ 785,000			$ 2,485,000
Investment in Company M	$ 6,580,000	$ -	D 50,000	$ 2,455,000
				A 3,545,000	$ -
				I 630,000
Equipment	$ 3,700,000	$ 2,052,000			$ 5,752,000
Patents	$ 95,000		A 2,250,000	E 250,000	$ 2,095,000
Unpatented technology	$ 2,125,000	$ 1,450,000	A 700,000	E 100,000	$ 4,175,000
Goodwill	$ 425,000	$ -	A 675,000		$ 1,100,000
Total assets	$ 15,650,000	$ 4,655,000			$ 17,000,000

Accounts payable	$ (500,000)	$ (90,000)			$ (590,000)
Long term debt	$ (1,000,000)	$ (1,200,000)	E 20,000	A 80,000	$ (2,260,000)
Common stock	$ (8,200,000)	$ (500,000)	$ 500,000		$ (8,200,000)
Retained earnings	$ (5,950,000)	$ (2,865,000)			$ (5,950,000)
Total liabilities and equity	$ (15,650,000)	$ (4,655,000)	$7,130,000	$ 7,130,000	$ (17,000,000)

Table: (2)

Working note:

Statement of retained earnings	Company A	Company M	Debit	Credit	Consolidated Balances
Retained earnings on 01/01	$ (5,340,000)	$ 1,955,000	$1,955,000		$ (5,340,000)
Net Income	$ (1,170,000)	$ (960,000)			$ (1,170,000)
Dividends declared	$ 560,000	$ 50,000		D 50.000	$ 560,000
Retained earnings on 31/12	$ (5,950,000)	$ (2,865,000)			$ (5,950,000)

Table: (3)

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Answer 2

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 3, Problem 25P

a.

To determine

Determine December 31, 2018, Investment in Company M balance.

a.

Expert Solution

Explanation of Solution

Investment in Company M balance:

Particulars		Amount
Consideration transferred		$ 5,875,000
Equity in Company M
2017 ($480,000 − $330,000)	$ 150,000
2018 ($900,000 − $330,000)	$ 630,000
Post-acquisition earnings		$ 780,000
Dividends of Company M		$ (75,000)
Investment balance on 31/12/2018		$ 6,580,000
Excess acquisition fair value:
Unpatented technology ($800,000 ÷ 8)		$ 100,000
Patents ($2,500,000 ÷ 10)		$ 250,000
Long term debt ($100,000 ÷ 5)		$ (20,000)
Annual amortization		$ 330,000

Table: (1)

b.

To determine

Prepare a worksheet to determine the consolidated values to be reported on Company A’s financial statements.

b.

Expert Solution

Explanation of Solution

Worksheet to determine the consolidated values to be reported on Company A’s financial statements:

Income statement	Company A	Company M	Debit($)	Credit($)	Consolidated Balances
Revenues	$ (6,400,000)	$ (3,900,000)			$ (10,300,000)
Cost of goods sold	$ 4,500,000	$ 2,500,000			$ 7,000,000
Depreciation expense	$ 875,000	$ 277,000			$ 1,152,000
Amortization expense	$ 430,000	$ 103,000	E 350,000		$ 883,000
Interest expense	$ 55,000	$ 60,000		E 20,000	$ 95,000
Equity earnings from Company M	$ (630,000)		I 630,000		$ -
Net income	$ (1,170,000)	$ (960,000)			$ (1,170,000)

Balance Sheet
Current assets	$ 75,000	$ 143,000			$ 218,000
Accounts receivable	$ 950,000	$ 225,000			$ 1,175,000
Inventories	$ 1,700,000	$ 785,000			$ 2,485,000
Investment in Company M	$ 6,580,000	$ -	D 50,000	$ 2,455,000
				A 3,545,000	$ -
				I 630,000
Equipment	$ 3,700,000	$ 2,052,000			$ 5,752,000
Patents	$ 95,000		A 2,250,000	E 250,000	$ 2,095,000
Unpatented technology	$ 2,125,000	$ 1,450,000	A 700,000	E 100,000	$ 4,175,000
Goodwill	$ 425,000	$ -	A 675,000		$ 1,100,000
Total assets	$ 15,650,000	$ 4,655,000			$ 17,000,000

Accounts payable	$ (500,000)	$ (90,000)			$ (590,000)
Long term debt	$ (1,000,000)	$ (1,200,000)	E 20,000	A 80,000	$ (2,260,000)
Common stock	$ (8,200,000)	$ (500,000)	$ 500,000		$ (8,200,000)
Retained earnings	$ (5,950,000)	$ (2,865,000)			$ (5,950,000)
Total liabilities and equity	$ (15,650,000)	$ (4,655,000)	$7,130,000	$ 7,130,000	$ (17,000,000)

Table: (2)

Working note:

Statement of retained earnings	Company A	Company M	Debit	Credit	Consolidated Balances
Retained earnings on 01/01	$ (5,340,000)	$ 1,955,000	$1,955,000		$ (5,340,000)
Net Income	$ (1,170,000)	$ (960,000)			$ (1,170,000)
Dividends declared	$ 560,000	$ 50,000		D 50.000	$ 560,000
Retained earnings on 31/12	$ (5,950,000)	$ (2,865,000)			$ (5,950,000)

Table: (3)

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Answer 3

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 3, Problem 25P

a.

To determine

Determine December 31, 2018, Investment in Company M balance.

a.

Expert Solution

Explanation of Solution

Investment in Company M balance:

Particulars		Amount
Consideration transferred		$ 5,875,000
Equity in Company M
2017 ($480,000 − $330,000)	$ 150,000
2018 ($900,000 − $330,000)	$ 630,000
Post-acquisition earnings		$ 780,000
Dividends of Company M		$ (75,000)
Investment balance on 31/12/2018		$ 6,580,000
Excess acquisition fair value:
Unpatented technology ($800,000 ÷ 8)		$ 100,000
Patents ($2,500,000 ÷ 10)		$ 250,000
Long term debt ($100,000 ÷ 5)		$ (20,000)
Annual amortization		$ 330,000

Table: (1)

b.

To determine

Prepare a worksheet to determine the consolidated values to be reported on Company A’s financial statements.

b.

Expert Solution

Explanation of Solution

Worksheet to determine the consolidated values to be reported on Company A’s financial statements:

Income statement	Company A	Company M	Debit($)	Credit($)	Consolidated Balances
Revenues	$ (6,400,000)	$ (3,900,000)			$ (10,300,000)
Cost of goods sold	$ 4,500,000	$ 2,500,000			$ 7,000,000
Depreciation expense	$ 875,000	$ 277,000			$ 1,152,000
Amortization expense	$ 430,000	$ 103,000	E 350,000		$ 883,000
Interest expense	$ 55,000	$ 60,000		E 20,000	$ 95,000
Equity earnings from Company M	$ (630,000)		I 630,000		$ -
Net income	$ (1,170,000)	$ (960,000)			$ (1,170,000)

Balance Sheet
Current assets	$ 75,000	$ 143,000			$ 218,000
Accounts receivable	$ 950,000	$ 225,000			$ 1,175,000
Inventories	$ 1,700,000	$ 785,000			$ 2,485,000
Investment in Company M	$ 6,580,000	$ -	D 50,000	$ 2,455,000
				A 3,545,000	$ -
				I 630,000
Equipment	$ 3,700,000	$ 2,052,000			$ 5,752,000
Patents	$ 95,000		A 2,250,000	E 250,000	$ 2,095,000
Unpatented technology	$ 2,125,000	$ 1,450,000	A 700,000	E 100,000	$ 4,175,000
Goodwill	$ 425,000	$ -	A 675,000		$ 1,100,000
Total assets	$ 15,650,000	$ 4,655,000			$ 17,000,000

Accounts payable	$ (500,000)	$ (90,000)			$ (590,000)
Long term debt	$ (1,000,000)	$ (1,200,000)	E 20,000	A 80,000	$ (2,260,000)
Common stock	$ (8,200,000)	$ (500,000)	$ 500,000		$ (8,200,000)
Retained earnings	$ (5,950,000)	$ (2,865,000)			$ (5,950,000)
Total liabilities and equity	$ (15,650,000)	$ (4,655,000)	$7,130,000	$ 7,130,000	$ (17,000,000)

Table: (2)

Working note:

Statement of retained earnings	Company A	Company M	Debit	Credit	Consolidated Balances
Retained earnings on 01/01	$ (5,340,000)	$ 1,955,000	$1,955,000		$ (5,340,000)
Net Income	$ (1,170,000)	$ (960,000)			$ (1,170,000)
Dividends declared	$ 560,000	$ 50,000		D 50.000	$ 560,000
Retained earnings on 31/12	$ (5,950,000)	$ (2,865,000)			$ (5,950,000)

Table: (3)

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Answer 4

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 3, Problem 25P

a.

To determine

Determine December 31, 2018, Investment in Company M balance.

a.

Expert Solution

Explanation of Solution

Investment in Company M balance:

Particulars		Amount
Consideration transferred		$ 5,875,000
Equity in Company M
2017 ($480,000 − $330,000)	$ 150,000
2018 ($900,000 − $330,000)	$ 630,000
Post-acquisition earnings		$ 780,000
Dividends of Company M		$ (75,000)
Investment balance on 31/12/2018		$ 6,580,000
Excess acquisition fair value:
Unpatented technology ($800,000 ÷ 8)		$ 100,000
Patents ($2,500,000 ÷ 10)		$ 250,000
Long term debt ($100,000 ÷ 5)		$ (20,000)
Annual amortization		$ 330,000

Table: (1)

b.

To determine

Prepare a worksheet to determine the consolidated values to be reported on Company A’s financial statements.

b.

Expert Solution

Explanation of Solution

Worksheet to determine the consolidated values to be reported on Company A’s financial statements:

Income statement	Company A	Company M	Debit($)	Credit($)	Consolidated Balances
Revenues	$ (6,400,000)	$ (3,900,000)			$ (10,300,000)
Cost of goods sold	$ 4,500,000	$ 2,500,000			$ 7,000,000
Depreciation expense	$ 875,000	$ 277,000			$ 1,152,000
Amortization expense	$ 430,000	$ 103,000	E 350,000		$ 883,000
Interest expense	$ 55,000	$ 60,000		E 20,000	$ 95,000
Equity earnings from Company M	$ (630,000)		I 630,000		$ -
Net income	$ (1,170,000)	$ (960,000)			$ (1,170,000)

Balance Sheet
Current assets	$ 75,000	$ 143,000			$ 218,000
Accounts receivable	$ 950,000	$ 225,000			$ 1,175,000
Inventories	$ 1,700,000	$ 785,000			$ 2,485,000
Investment in Company M	$ 6,580,000	$ -	D 50,000	$ 2,455,000
				A 3,545,000	$ -
				I 630,000
Equipment	$ 3,700,000	$ 2,052,000			$ 5,752,000
Patents	$ 95,000		A 2,250,000	E 250,000	$ 2,095,000
Unpatented technology	$ 2,125,000	$ 1,450,000	A 700,000	E 100,000	$ 4,175,000
Goodwill	$ 425,000	$ -	A 675,000		$ 1,100,000
Total assets	$ 15,650,000	$ 4,655,000			$ 17,000,000

Accounts payable	$ (500,000)	$ (90,000)			$ (590,000)
Long term debt	$ (1,000,000)	$ (1,200,000)	E 20,000	A 80,000	$ (2,260,000)
Common stock	$ (8,200,000)	$ (500,000)	$ 500,000		$ (8,200,000)
Retained earnings	$ (5,950,000)	$ (2,865,000)			$ (5,950,000)
Total liabilities and equity	$ (15,650,000)	$ (4,655,000)	$7,130,000	$ 7,130,000	$ (17,000,000)

Table: (2)

Working note:

Statement of retained earnings	Company A	Company M	Debit	Credit	Consolidated Balances
Retained earnings on 01/01	$ (5,340,000)	$ 1,955,000	$1,955,000		$ (5,340,000)
Net Income	$ (1,170,000)	$ (960,000)			$ (1,170,000)
Dividends declared	$ 560,000	$ 50,000		D 50.000	$ 560,000
Retained earnings on 31/12	$ (5,950,000)	$ (2,865,000)			$ (5,950,000)

Table: (3)

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Answer 5

Chapter 3, Problem 25P

a.

To determine

Determine December 31, 2018, Investment in Company M balance.

a.

Expert Solution

Explanation of Solution

Investment in Company M balance:

Particulars		Amount
Consideration transferred		$ 5,875,000
Equity in Company M
2017 ($480,000 − $330,000)	$ 150,000
2018 ($900,000 − $330,000)	$ 630,000
Post-acquisition earnings		$ 780,000
Dividends of Company M		$ (75,000)
Investment balance on 31/12/2018		$ 6,580,000
Excess acquisition fair value:
Unpatented technology ($800,000 ÷ 8)		$ 100,000
Patents ($2,500,000 ÷ 10)		$ 250,000
Long term debt ($100,000 ÷ 5)		$ (20,000)
Annual amortization		$ 330,000

Table: (1)

b.

To determine

Prepare a worksheet to determine the consolidated values to be reported on Company A’s financial statements.

b.

Expert Solution

Explanation of Solution

Worksheet to determine the consolidated values to be reported on Company A’s financial statements:

Income statement	Company A	Company M	Debit($)	Credit($)	Consolidated Balances
Revenues	$ (6,400,000)	$ (3,900,000)			$ (10,300,000)
Cost of goods sold	$ 4,500,000	$ 2,500,000			$ 7,000,000
Depreciation expense	$ 875,000	$ 277,000			$ 1,152,000
Amortization expense	$ 430,000	$ 103,000	E 350,000		$ 883,000
Interest expense	$ 55,000	$ 60,000		E 20,000	$ 95,000
Equity earnings from Company M	$ (630,000)		I 630,000		$ -
Net income	$ (1,170,000)	$ (960,000)			$ (1,170,000)

Balance Sheet
Current assets	$ 75,000	$ 143,000			$ 218,000
Accounts receivable	$ 950,000	$ 225,000			$ 1,175,000
Inventories	$ 1,700,000	$ 785,000			$ 2,485,000
Investment in Company M	$ 6,580,000	$ -	D 50,000	$ 2,455,000
				A 3,545,000	$ -
				I 630,000
Equipment	$ 3,700,000	$ 2,052,000			$ 5,752,000
Patents	$ 95,000		A 2,250,000	E 250,000	$ 2,095,000
Unpatented technology	$ 2,125,000	$ 1,450,000	A 700,000	E 100,000	$ 4,175,000
Goodwill	$ 425,000	$ -	A 675,000		$ 1,100,000
Total assets	$ 15,650,000	$ 4,655,000			$ 17,000,000

Accounts payable	$ (500,000)	$ (90,000)			$ (590,000)
Long term debt	$ (1,000,000)	$ (1,200,000)	E 20,000	A 80,000	$ (2,260,000)
Common stock	$ (8,200,000)	$ (500,000)	$ 500,000		$ (8,200,000)
Retained earnings	$ (5,950,000)	$ (2,865,000)			$ (5,950,000)
Total liabilities and equity	$ (15,650,000)	$ (4,655,000)	$7,130,000	$ 7,130,000	$ (17,000,000)

Table: (2)

Working note:

Statement of retained earnings	Company A	Company M	Debit	Credit	Consolidated Balances
Retained earnings on 01/01	$ (5,340,000)	$ 1,955,000	$1,955,000		$ (5,340,000)
Net Income	$ (1,170,000)	$ (960,000)			$ (1,170,000)
Dividends declared	$ 560,000	$ 50,000		D 50.000	$ 560,000
Retained earnings on 31/12	$ (5,950,000)	$ (2,865,000)			$ (5,950,000)

Table: (3)

Answer 6

Chapter 3, Problem 25P

a.

To determine

Determine December 31, 2018, Investment in Company M balance.

a.

Expert Solution

Explanation of Solution

Investment in Company M balance:

Particulars		Amount
Consideration transferred		$ 5,875,000
Equity in Company M
2017 ($480,000 − $330,000)	$ 150,000
2018 ($900,000 − $330,000)	$ 630,000
Post-acquisition earnings		$ 780,000
Dividends of Company M		$ (75,000)
Investment balance on 31/12/2018		$ 6,580,000
Excess acquisition fair value:
Unpatented technology ($800,000 ÷ 8)		$ 100,000
Patents ($2,500,000 ÷ 10)		$ 250,000
Long term debt ($100,000 ÷ 5)		$ (20,000)
Annual amortization		$ 330,000

Table: (1)

Answer 7

Chapter 3, Problem 25P

a.

To determine

Determine December 31, 2018, Investment in Company M balance.

Answer 8

a.

Expert Solution

Explanation of Solution

Investment in Company M balance:

Particulars		Amount
Consideration transferred		$ 5,875,000
Equity in Company M
2017 ($480,000 − $330,000)	$ 150,000
2018 ($900,000 − $330,000)	$ 630,000
Post-acquisition earnings		$ 780,000
Dividends of Company M		$ (75,000)
Investment balance on 31/12/2018		$ 6,580,000
Excess acquisition fair value:
Unpatented technology ($800,000 ÷ 8)		$ 100,000
Patents ($2,500,000 ÷ 10)		$ 250,000
Long term debt ($100,000 ÷ 5)		$ (20,000)
Annual amortization		$ 330,000

Table: (1)

Answer 9

a.

Expert Solution

Answer 10

a.

Expert Solution

Answer 11

Expert Solution

Answer 12

b.

To determine

Prepare a worksheet to determine the consolidated values to be reported on Company A’s financial statements.

b.

Expert Solution

Explanation of Solution

Worksheet to determine the consolidated values to be reported on Company A’s financial statements:

Income statement	Company A	Company M	Debit($)	Credit($)	Consolidated Balances
Revenues	$ (6,400,000)	$ (3,900,000)			$ (10,300,000)
Cost of goods sold	$ 4,500,000	$ 2,500,000			$ 7,000,000
Depreciation expense	$ 875,000	$ 277,000			$ 1,152,000
Amortization expense	$ 430,000	$ 103,000	E 350,000		$ 883,000
Interest expense	$ 55,000	$ 60,000		E 20,000	$ 95,000
Equity earnings from Company M	$ (630,000)		I 630,000		$ -
Net income	$ (1,170,000)	$ (960,000)			$ (1,170,000)

Balance Sheet
Current assets	$ 75,000	$ 143,000			$ 218,000
Accounts receivable	$ 950,000	$ 225,000			$ 1,175,000
Inventories	$ 1,700,000	$ 785,000			$ 2,485,000
Investment in Company M	$ 6,580,000	$ -	D 50,000	$ 2,455,000
				A 3,545,000	$ -
				I 630,000
Equipment	$ 3,700,000	$ 2,052,000			$ 5,752,000
Patents	$ 95,000		A 2,250,000	E 250,000	$ 2,095,000
Unpatented technology	$ 2,125,000	$ 1,450,000	A 700,000	E 100,000	$ 4,175,000
Goodwill	$ 425,000	$ -	A 675,000		$ 1,100,000
Total assets	$ 15,650,000	$ 4,655,000			$ 17,000,000

Accounts payable	$ (500,000)	$ (90,000)			$ (590,000)
Long term debt	$ (1,000,000)	$ (1,200,000)	E 20,000	A 80,000	$ (2,260,000)
Common stock	$ (8,200,000)	$ (500,000)	$ 500,000		$ (8,200,000)
Retained earnings	$ (5,950,000)	$ (2,865,000)			$ (5,950,000)
Total liabilities and equity	$ (15,650,000)	$ (4,655,000)	$7,130,000	$ 7,130,000	$ (17,000,000)

Table: (2)

Working note:

Statement of retained earnings	Company A	Company M	Debit	Credit	Consolidated Balances
Retained earnings on 01/01	$ (5,340,000)	$ 1,955,000	$1,955,000		$ (5,340,000)
Net Income	$ (1,170,000)	$ (960,000)			$ (1,170,000)
Dividends declared	$ 560,000	$ 50,000		D 50.000	$ 560,000
Retained earnings on 31/12	$ (5,950,000)	$ (2,865,000)			$ (5,950,000)

Table: (3)

Answer 13

b.

To determine

Prepare a worksheet to determine the consolidated values to be reported on Company A’s financial statements.

Answer 14

b.

Expert Solution

Explanation of Solution

Worksheet to determine the consolidated values to be reported on Company A’s financial statements:

Income statement	Company A	Company M	Debit($)	Credit($)	Consolidated Balances
Revenues	$ (6,400,000)	$ (3,900,000)			$ (10,300,000)
Cost of goods sold	$ 4,500,000	$ 2,500,000			$ 7,000,000
Depreciation expense	$ 875,000	$ 277,000			$ 1,152,000
Amortization expense	$ 430,000	$ 103,000	E 350,000		$ 883,000
Interest expense	$ 55,000	$ 60,000		E 20,000	$ 95,000
Equity earnings from Company M	$ (630,000)		I 630,000		$ -
Net income	$ (1,170,000)	$ (960,000)			$ (1,170,000)

Balance Sheet
Current assets	$ 75,000	$ 143,000			$ 218,000
Accounts receivable	$ 950,000	$ 225,000			$ 1,175,000
Inventories	$ 1,700,000	$ 785,000			$ 2,485,000
Investment in Company M	$ 6,580,000	$ -	D 50,000	$ 2,455,000
				A 3,545,000	$ -
				I 630,000
Equipment	$ 3,700,000	$ 2,052,000			$ 5,752,000
Patents	$ 95,000		A 2,250,000	E 250,000	$ 2,095,000
Unpatented technology	$ 2,125,000	$ 1,450,000	A 700,000	E 100,000	$ 4,175,000
Goodwill	$ 425,000	$ -	A 675,000		$ 1,100,000
Total assets	$ 15,650,000	$ 4,655,000			$ 17,000,000

Accounts payable	$ (500,000)	$ (90,000)			$ (590,000)
Long term debt	$ (1,000,000)	$ (1,200,000)	E 20,000	A 80,000	$ (2,260,000)
Common stock	$ (8,200,000)	$ (500,000)	$ 500,000		$ (8,200,000)
Retained earnings	$ (5,950,000)	$ (2,865,000)			$ (5,950,000)
Total liabilities and equity	$ (15,650,000)	$ (4,655,000)	$7,130,000	$ 7,130,000	$ (17,000,000)

Table: (2)

Working note:

Statement of retained earnings	Company A	Company M	Debit	Credit	Consolidated Balances
Retained earnings on 01/01	$ (5,340,000)	$ 1,955,000	$1,955,000		$ (5,340,000)
Net Income	$ (1,170,000)	$ (960,000)			$ (1,170,000)
Dividends declared	$ 560,000	$ 50,000		D 50.000	$ 560,000
Retained earnings on 31/12	$ (5,950,000)	$ (2,865,000)			$ (5,950,000)