Following are selected accounts for Mergaronite Company and Hill, Inc., as of December 31, 2021. Several of Mergaronite’s accounts have been omitted. Credit balances are indicated by parentheses. Dividends were declared and paid in the same period.

Assume that Mergaronite took over Hill on January 1, 2017, by issuing 7,000 shares of common stock having a par value of $10 per share but a fair value of $100 each. On January 1, 2017, Hill’s land was undervalued by $20,000, its buildings were overvalued by $30,000, and equipment was undervalued by $60,000. The buildings had a 10-year remaining life; the equipment had a 5-year remaining life. A customer list with an appraised value of $100,000 was developed internally by Hill and was to be written off over a 20-year period.

a. Determine and explain the December 31, 2021, consolidated totals for the following accounts:

b. In requirement (a), why can the consolidated totals be determined without knowing which method the parent used to account for the subsidiary?

c. If the parent uses the equity method, what consolidation entries would be used on a 2021 worksheet?

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Mergaronite Hil Revenues... Cost of goods sold. Depreciation expense $(600,000) 280,000 $(250,000) 100,000 120,000 50.000 Not given (900,000) 130,000 Investment income NA Retained earnings, 1/1/21. Dividends declared.. Current assets. (600,000) 40,000 200,000 300,000 690.000 90.000 Land..... 140.000 Buildings (net) Equipment (net).. Llabilities..... Common stock Additional paid-in capital. 500.000 200,000 250.000 (400.000) (300,000) (50,000) (310.000) (40,000) (160,000) .....