The Krause Corporation acquired 80 percent of the 100,000 outstanding voting shares of Leahy, Inc., for $6.30 per share on January 1, 2011. The remaining 20 percent of Leahy€™s shares also traded actively at $6.30 per share before and after Krause€™s acquisition. An appraisal made on that date determined that all book values appropriately reflected the fair values of Leahy€™s underlying accounts except that a building with a 5-year life was undervalued by $45,000 and a fully amortized trademark with an estimated 10-year remaining life had a $60,000 fair value. At the acquisition date, Leahy reported common stock of $100,000 and a retained earnings balance of $280,000. Following are the separate financial statements for the year ending December 31, 2012:

a. Prepare a worksheet to consolidate these two companies as of December 31, 2012.
b. Prepare a 2012 consolidated income statement for Krause and Leahy.
c. If instead the noncontrolling interest shares of Leahy had traded for $4.85 surrounding Krause€™s acquisition date, how would the consolidated statementschange?

Cost of goods sold Operating expenses --.-..-. 2 5 (160,000) 000) (700,000) $350,000) Retained earnings, 1/1/12 Net income (above) Dividends paid Retained earnings, 12B1/12 Investment in Leahy, Inc. Buildings and equipment (net) $1,580,000 Retained earnings, 12B1/12 (above) Total liabilities and equities . $(1580,000) (725,000)