On January 1, 20X1, Chesapeake Corporation issued common stock with a fair value of $810,000 in exchange for 90% of Deardon Corporation’s common stock. Following are the January 1, 20X1, separate balance sheets of Chesapeake and Deardon immediately following the acquisition, plus fair value information for Deardon’s assets and liabilities:

Required:

1. Provide the adjustments and elimination entries needed to prepare the post-acquisition January 1, 20X1, consolidated balance sheet under the acquisition method.

2. Prepare the January 1, 20X1, consolidated balance sheet.

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Deardon Chesapeake Book Value Fair Value Assets $ 500,000 800,000 100,000 810,000 $ 400,000 800,000 $ 450,000 775,000 Current assets PP&E, net Patent 75,000 Investment in Deardon Total assets $2,210,000 $1,200,000 $1,300,000 Liabilities $ 400,000 500,000 $ 150,000 270,000 $ 150,000 300,000 Current liabilities Long-term liabilities Total liabilities 900,000 420,000 $ 450,000 Stockholders' Equity Common stock 900,000 410,000 400,000 380,000 Retained earnings Total stockholders' equity 1,310,000 780,000 Total liabilities and equity $2,210,000 $1,200,000