Lucy Company issues securities with a fair value of $468,000 for a 90% interest in Diamond Company on January 1, 2011, at which time Diamond Company has the following balance sheet:

It is believed that the inventory and the building are undervalued by $20,000 and $50,000, respectively. The building has a 10-year remaining life; the inventory on hand on January 1, 2011, is sold during the year. The deferred tax liability associated with the asset revaluations is to be reflected in the consolidated statements. Each company has an income tax rate of 30%.
Any remaining excess is goodwill.
The separate income statements of the two companies prepared for 2011 are as follows:

1. Prepare a value analysis and a determination and distribution of excess schedule for the investment.
2. Prepare the 2011 consolidated income statement and its related income distribution schedules.

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Assets Liabilities and Equity Accounts receivable. .50,000 Inventory Current liabilities 80,000 Common stock ($5 par 20,000 Paid-in capital in excess of par 00,000 Retained earnings... . $70,000 100,000 130,000 50,000 $350,000 Building (net) Total assets. . .. $350,000 Tola labities and equity Diamond Sales Cost of goods sold Gross profit General expenses Depreciation expense (200,000) (90,000) . 200,000 60,000 50,000 125,000) 160,000) _1|5,000) $90,000 20,000 Operating income Subsidiary income(90% $ 14,000 subsidiary net income) Net income before income tax … Provision for tax (does not include tax on subsidiary income. 12,600 ..102,600 20,000 6,000) 75,600 14,000 (27,000) Net income