Pearson Company purchased a 100% interest in Sanders Company and a 90% interest in Taylor Company on January 2, 2011, for $800,000 and $1,300,000, respectively. The account balances and fair values of the acquired companies on the acquisition date were as follows:

Sanders Company’s equipment has a remaining useful life of 10 years. Two-thirds of Taylor
Company’s inventory was sold in 2011, and the rest was sold in the following year. In 2011, Sanders
Company reported net income of $500,000 and declared dividends of $100,000. Taylor Company’s net income and declared dividends for 2011 were $800,000 and $200,000, respectively.

Required:
A. Prepare in general journal form the entries on the books of Pearson Corporation to ac-count for its investments in 2011.
B. Prepare the elimination entries necessary in the consolidated statements workpaper for the year ended December 31,2011.

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Sanders Taylor Book Value Fair Value ok Value Pair Value 200,000 $200,000 400,000 400.000 300,000 350,000 600,000 600.000 350,000 $350,000 500,000 575,000 600,000 625,000 Current assets Inventory Plant and equipment (net) Land 600,000 550,000 Total $2,000,00 Current liabilities Bonds payable Capital stock Retained earnings $500,000 $500,00o 300,000 300,000 500,000 200,000 300,000 $300,000 600,000 800,000 300,000 600,000 Total $1,500,000 $2,000,000