On January 1, 2015, Pillar Company purchases an 80% interest in Stark Company for $890,000. On the date of acquisition, Stark has total owners' equity of $800,000. Buildings, which have a 20-year life, are undervalued by $200,000. The remaining excess of cost over book value is attributable to goodwill. For tax purposes only, goodwill is amortized over 15 years.

On January 1, 2015, Stark sells equipment, with a net book value of $60,000, to Pillar for $100,000. The equipment has a 5-year remaining life. Straight-line depreciation is used.

During 2017, Pillar sells $70,000 worth of merchandise to Stark. As a result of these intercompany sales, Stark holds beginning inventory of $40,000 and ending inventory of $30,000.

At December 31, 2017, Stark owes Pillar $8,000 from merchandise sales. Pillar has a gross profit rate of 50%.

Neither company has provided for income tax. The companies qualify as an affiliated group and, thus, will file a consolidated tax return based on a 30% corporate tax rate. The original purchase is not a nontaxable exchange.

Trial balances of Pillar and Stark as of December 31, 2017, are as follows:

Required
Prepare a consolidated worksheet based on the trial balances. Include a provision for income tax, a determination and distribution of excess schedule, and income distribution schedules.
On January 1, 2015, Parson Company acquires an 80% interest in Solar Company for $500,000. Solar had the following balance sheet on the date of acquisition:
Solar Company
Balance Sheet
January 1, 2015

Buildings, which have a 20-year life, are undervalued by $70,000. Equipment, which has a 5-year life, is undervalued by $50,000. Any remaining excess of cost over book value is attributable to goodwill, which has a 15-year life for tax purposes only.

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Pillar Stark Com Compan Cash Accounts Receivable.... Inventory Investment in Stark.. _ _ . . Plant and Equipment Accumulated Depreciation Liabilities .. Deferred Tax Liability (goodwill amortization) .. Common Stock ...___.. Retained Earnings, January 1, 2017 Sales Cost of Goods Sold DepreciationExpense.. 208,600 380,000 130,000 150,000 80,000 120,000 1,098,000 600,000 900,000 (350,000 (300,000) 205000150,000) (3,600) (500,000) (300,000) (950,000) 700,000) (800,000 (550,000) 430,000 320,000 50,000 210,000 120,000 60,000 48 Totals 0 0 Assets Liabilities and Equity 60,000 Accounts payable 0,000 Bonds payable 70,000 100,000 ccounts receivable Inventory krwaks...-....- -- Land Buildings 120,000 Common stock 250,000 Paid-in capital in excess (50,000) ·fpar 10,000 190,000 30,000 Total assets liabilities and equity ..$540,000