Following are the individual financial statements for Gibson and Davis for the year ending December 31, 2018:

 

	Gibson				Davis
Sales	$	(827,000	)		$	(372,000	)
Cost of goods sold		392,000				172,000
Operating expenses		224,000				83,000
Dividend income		(12,000	)			0
Net income	$	(223,000	)		$	(117,000	)
Retained earnings, 1/1/18	$	(710,000	)		$	(408,000	)
Net income		(223,000	)			(117,000	)
Dividends declared		70,000				20,000
Retained earnings, 12/31/18	$	(863,000	)		$	(505,000	)
Cash and receivables	$	162,250			$	87,000
Inventory		596,000				227,000
Investment in Davis		558,750				0
Buildings (net)		573,000				664,000
Equipment (net)		409,000				434,000
Total assets	$	2,299,000			$	1,412,000
Liabilities	$	(806,000	)		$	(567,000	)
Common stock		(630,000	)			(340,000	)
Retained earnings, 12/31/18		(863,000	)			(505,000	)
Total liabilities and stockholders' equity	$	(2,299,000	)		$	(1,412,000	)

 

Gibson acquired 60 percent of Davis on April 1, 2018, for $558,750. On that date, equipment owned by Davis (with a five-year remaining life) was overvalued by $63,000. Also on that date, the fair value of the 40 percent noncontrolling interest was $372,500. Davis earned income evenly during the year but declared the $40,000 dividend on November 1, 2018.

 

1. Prepare a consolidated income statement for the year ending December 31, 2018.

2. Determine the consolidated balance for each of the following accounts as of December 31, 2018:

 

• Goodwill
• Equipment (net)
• Common stock
• Buildings (net)
• Dividends declared