On January 1, 2003, Cale Corp. paid $1,020,000 to purchase Kaltop Co. Kaltop maintained separate incorporation.

On January 1, 2003, Cale Corp. paid $1,020,000 to purchase Kaltop Co. Kaltop maintained separate incorporation. Cale used the equity method to account for the investment. Cale also paid $20,000 to investment bankers to arrangethe acquisition. Since it was a cash purchase, there were no issue costs for securities.Katop’s assets, liabilities, and stockholders’ equity accounts were as follows:1-Jan-03FAIRBOOKMARKETVALUEVALUEdr (cr)dr (cr)DIFFERENCELAND $72,000 $192,000 $120,000 BUILDING (20 YR LIFE) $240,000 $268,000 $28,000 EQUIPMENT (10 YR LIFE) $540,000 $516,000 $(24,000)COMMON STOCK $(228,000)ADDITIONAL PAID IN CAPITAL $(384,000)RETAINED EARNINGS $(216,000) $952,000 $124,000 PARTIAL WORKSHEET FOR DECEMBER 31, 2003:PART DCALEKALTOPELIMINATIONSdr(cr)dr(cr)drcrINCOME STATEMENT:Revenue $(350,000)Net income $(126,000)RETAINED EARNINGS STATEMENT:Retained earnings 1/1/2003 $(216,000) S $216,000 Net income $(126,000)Less dividends paid $48,000 D $48,000 Retained earning 12/31/2003 $(294,000)BALANCE SHEET 12/31/2003Current assets $162,000 D $48,000 S $828,000 $(780,000)Current liabilitiesLong term liabilities $(120,000)Common stock $(228,000) S $228,000 Additional paid in capital $(384,000) S $384,000 Retained earnings 1/1/2003 $(216,000)REQUIRED:A. Determine any investment cost over the book value of the net assets of Kaltop and any goodwill.B. Create a journal entry to record the purchase of Kaltop’s stock on January 1, 2003.C. Create the journal entries to record the income of the subsidiary and the investment of the subsidiaryat the end of the year, using the equity method.D. Create the eliminations for the consolidated worksheet required at the end of the year.

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