On January 1, 2009, Push Company purchased an 80% interest in the capital stock of Way Down Company for $820,000. At that time, WayDown Company had capital stock of $500,000 and retained earnings of $100,000. Differences between the fair value and the book value of identifiable assets of WayDown Company were as follows:

Fair Value in Excess of Book Value

Equipment..........$125,000

Land.........................62,500

Inventory................37,500

The book values of all other assets and liabilities of WayDown Company were equal to their fair values on January 1, 2009. The equipment had a remaining life of five years on January 1, 2009. The inventory was sold in 2009. WayDown Company revalued its assets on January 2, 2009. New values were allocated on the basis of the fair value onWayDown Company as a whole imputed from the transaction. Financial data for 2009 are presented here:

Required:

A. In general journal form, prepare the entry made by WayDown Company on January 2, 2009, to record the effect of the pushed down values implied by the purchase of its stock by Push Company assuming that values were allocated on the basis of the fair value of WayDown Company as a whole imputed from the transaction.

B. Prepare a consolidated financial statements workpaper for the year ended December 31, 2009.

C. What effect does the decision to apply the full push down approach have on the following items (compared to the case where push down accounting is not used):

1. Consolidated net income?

2. Consolidated retained earnings?

3. Consolidated net assets?

4. Noncontrolling interest in consolidated net assets?

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Push Company WayDown Company Sales $ 400,000 $1,050,000 40,000 1,090,000 850,000 35,000 65,000 950,000 $ 140,000 Dividend income -0- Total revenue Cost of goods sold Depreciation expense Other expenses Total cost and expense 400,000 180,000 50,000 50,000 280,000 120,000 Net income 1/1 Retained earnings $ 480,000 140,000 $ 102,500 120,000 (50,000) $ 172,500 Net income Dividends declared (100,000) $ 520,000 12/31 Retained earnings $ 80,000 250,000 230,000 820,000 Cash $ 35,000 Accounts receivable 170,000 150,000 Inventory Investment in WayDown Goodwill 200,000 362,500 300,000 Land Plant and equipment Total assets 350,000 $1,730,000 $1,217,500 $ 160,000 50,000 1,000,000 Accounts payable Notes payable Capital stock Revaluation capital Retained earnings Total liabilities and equity $ 100,000 20,000 500,000 425,000 172,500 $1,217,500 520,000 $1,730,000