On December 31, 20X4, Worth Corporation acquired 90 percent of Brinker Inc.’s common stock for $864,000. At that date, the fair value of the noncontrolling interest was $96,000. Of the $240,000 differential, $5,000 related to the increased value of Brinker’s inventory, $75,000 related to the increased value of its land, $60,000 related to the increased value of its equipment, and $50,000 was associated with a change in the value of its notes payable due to increasing interest rates. Brinker’s equipment had a remaining life of 15 years from the date of combination. Brinker sold all inventory it held at the end of 20X4 during 20X5; the land to which the differential related also was sold during the year for a large gain. The amortization of the differential relating to Brinker’s notes payable was $7,500 for 20X5.

At the date of combination, Brinker reported retained earnings of $120,000, common stock outstanding of $500,000, and premium on common stock of $100,000. For the year 20X5, it reported net income of $150,000 but paid no dividends. Worth accounts for its

investment in Brinker using the equity method.

Required

a. Present all entries that Worth would have recorded during 20X5 with respect to its investment in Brinker.

b. Present all elimination entries that would have been included in the worksheet to prepare a full set of consolidated financial statements for the year 20X5.