Perkins Company acquired 100% of Schultz Company on January 1, 2010, for $161,500. On December 31, 2010, 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, 2010. Any difference between the book value of equity acquired and the value implied by the purchase price relates togoodwill.

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Perkins Schultz Cash Inventory Investmentin Schultz Company Land Cost of Goods Sold Other Expense Dividends Declared $ 25,000 105,000 222,000 111,000 225,000 40,000 15,000 30,000 97,500 97,000 59,500 40,000 10,000 $743,000 4,000 Total Debits Accounts Payable Capital Stock Other Contributed Capital Retained Earnings, 1/1 Sales Equity in Subsidiary Income $ 72,500 160,000 35,000 25,000 380,000 70,500 17,500 75,000 17,500 54,000 170,000 Total Credits $743,000$334.000