Assume Ellsworth uses the initial value method. Prepare consolidation entries for 2014.

Question I Ellsworth acquired Merrell on January 1, 2008 by issuing shares of common stock. On January 1, 2008 all of Merrell's assets and liabilities had fair values equal to book value except for the following: land was undervalued by $20,000 buildings were undervalued by $300,000 (20-year remaining useful life) equipment was overvalued by $60,000 (6-year remaining useful life) In addition, a customer list with an appraised value of $200,000 and a 10-year useful life had been developed internally by Merrell. Assume Ellsworth originally acquired Merrell for the fair value of its net identifiable assets, which was $810,000 at the date of acquisition. Merrell's Retained Earnings balance at the date of acquisition was $150,000 The following are selected accounts for Ellsworth Company and Merrell, Inc. as of December 31, 2014 (Ellsworth's Investment in Merrell and Equity in Merrell's Income accounts have been omitted). Credit balances are indicated by parentheses. Ellsworth Merrell (450,000 (600,000) Revenues Cost of Goods Sold Depreciation Expense 200,000 280,000 900,000 600,000 Retained Earnings, 1/1/14 600,000 Dividends Paid Current Assets Land 300,000 200,000 200,000 40.000 690,000 90,000 140,000 250,000 Buildings (net Equipment (net Liabilities Common Stock Additional Paid-in Capital (310,000 40,000 160,000 80,000