Michael Company acquired Aaron Company on January 1, 2017 by issuing 20,000 shares of its common stock. At the time of acquisition, Aaron had $380,000 in retained earnings and $510,000 in total book value, with royalty agreements undervalued by $60,000 and a trademark valued at $50,000 not on its books. The document provides financial information for Michael and Aaron as of December 31, 2021 and instructs the reader to prepare a consolidation worksheet and determine account balances under the equity method for Michael's individual financial statements.

1. Following are separate financial statements of Michael Company and Aaron Company as of
December 31, 2021 (credit balances indicated by parentheses). Michael acquired all of Aaron's
outstanding voting stock on January 1, 2017, by issuing 20,000 shares of its own $1 par
common stock. On the acquisition date, Michael Company's stock actively traded at $31.00 per
share. On the date of acquisition, Aaron reported retained earnings of $380 , 000 and a total book
value of $510 , 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 perlod. a. Using the
preceding information, prepare a consolidation worksheet for these two companies as of
December 31 , 2021 . b. Assuming that Michael applied the equity method to this investment,
what would the following account balances be on the parent's individual financial statements?
Complete this question by entering your answers in the tabs below. Using the preceding
information, prepare a consolidation worksheet for these two companies as of December 31,
2021. (For accounts where multiple consolidation entries are required, combine all debit entries
into one amount and enter this amount in the debit column of the worksheet. Similarly, combine
all credit entries into one amount and enter this amount in the credit column of the worksheet.
Amounts in the Debit and Credit columns should be entered as positive. Input all amounts as
positive values.) Using the preceding information, prepare a consolidation worksheet for these
two companies as of December 31, 2021. (For accounts where multiple consolidation entries are
required, combine all debit entries into one amount and enter this amount in the debit column of
the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the
credit column of the worksheet. Amounts in the Debit and Credit columns should be entered as
positive. Input all amounts as positive values.) Complete this question by entering your answers
in the tabs below. Assuming that Michael applied the equity method to this investment, what
would the following account balances be on the parent's individual financial statements?