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Following are separate financial statements of Michael Company and Aaron Company as of December 31, 2018 (credit balances indicated by parentheses). Michael acquired all of Aarons outstanding voting stock on January 1, 2014, by issuing 20,000 shares of its own $1 par common stock. On the acquisition date, Michael Companys stock actively traded at $32 per share.

	Michael Company 12/31/18				Aaron Company 12/31/18
Revenues	$	(688,000	)		$	(417,000	)
Cost of goods sold		309,000				163,500
Amortization expense		119,400				91,000
Dividend income		(5,000	)			0
Net income	$	(264,600	)		$	(162,500	)
Retained earnings, 1/1/18	$	(1,040,000	)		$	(711,000	)
Net income (above)		(264,600	)			(162,500	)
Dividends declared		90,000				5,000
Retained earnings, 12/31/18	$	(1,214,600	)		$	(868,500	)
Cash	$	154,000			$	17,100
Receivables		455,000				247,000
Inventory		597,000				312,000
Investment in Aaron Company		640,000				0
Copyrights		519,000				407,000
Royalty agreements		944,000				382,000
Total assets	$	3,309,000			$	1,365,100
Liabilities	$	(994,400	)		$	(366,600	)
Preferred stock		(300,000	)			0
Common stock		(500,000	)			(100,000	)
Additional paid-in capital		(300,000	)			(30,000	)
Retained earnings, 12/31/18		(1,214,600	)			(868,500	)
Total liabilities and equity	$	(3,309,000	)		$	(1,365,100	)

On the date of acquisition, Aaron reported retained earnings of $400,000 and a total book value of $530,000. At that time, its royalty agreements were undervalued by $60,000. This intangible was assumed to have a six-year remaining life with no residual value. Additionally, Aaron owned a trademark with a fair value of $50,000 and a 10-year remaining life that was not reflected on its books. Aaron declared and paid dividends in the same period.

MICHAEL COMPANY AND CONSOLIDATED SUBSIDIARY Consolidation Worksheet For Year Ending December 31, 2018 Consolidation Entries Consolidated Michael Aaron Credit Totals Accounts $(688,000) $ (417,000) Revenues 1,105,000 163,500 Cost of goods sold 309,000 472,500 15,000 119,400 91,000 225,400 Amortization expense Dividend income 5,000 $(264,600) $ (162,500) $ 1,802,900 Net income Retained earnings, 11 (1,040,000) 1,040,000 Retained earnings, 11 Aaron 711,000 (264,600) $ 1,802,900 Net income (above) (162,500) 90,000 Dividends declared 5,000 5,000 90,000 $ (1,214,600) $ (868,500) $ 2,932,900 Retained earnings, 12/31 154,000 17,100 171,100 Receivables 455,000 247,000 702,000 597,000 312,000 909,000 nventory Investment in Aaron Co 640,000 640,000 640,000 407,000 Copyrights 519,000 926,000 Royalty agreements 944,000 382,000 10,000 1,336,000 30,000 5,000 25,000 Trademark $ 3,309,0001,365,100 $ 4,069,100 Total assets $(994,400) $ (366,600) 1,361,000 ia (300,000) Preferred stock 300,000 Common stock (500,000) (100,000) 100,000 500,000 (300,000) 30,000 Additional paid-in capital (30,000) 300,000 Retained earnings, 12/31 (868,500) (1,214,600) 2,932,900 above $ (3,309,000) $ (1,365,100) 1,531,000 $ 660,000 $5,393,900 Total liabilities and equity

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