Perkins Company acquired 100% of Schultz Company on January 1, 2017, for $161,500. On December 31, 2017, the companies prepared the following trial balances:

Required:

A. What method is being used by Perkins to account for its investment in Schultz Company? How can you tell?

B. Prepare a workpaper for the preparation of consolidated financial statements on December 31, 2017. Any difference between the book value of equity acquired and the value implied by the purchase price relates to goodwill.

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Schultz Perkins $ 25,000 $ 30,000 Cash Inventory 105,000 97,500 Investment in Schultz Company 222,000 Land 111,000 97,000 Cost of Goods Sold 225,000 59,500 Other Expense 40,000 40,000 Dividends Declared 15,000 10,000 Total Debits $743,000 $334,000 $ 72,500 $ 17,500 Accounts Payable 160,000 Capital Stock Other Contributed Capital Retained Earnings, 1/1 75,000 35,000 17,500 25,000 54,000 Sales 380,000 170,000 Equity in Subsidiary Income 70,500 Total Credits $743,000 $334,000