Prince Corporation holds 75 percent of the common stock of SwordDistributors Inc., purchased on December 31, 20X1, for $2,220,000.At the date of acquisition, Sword reported common stock with a parvalue of $950,000, additional paid-in capital of $1,300,000, andretained earnings of $550,000. The fair value of the noncontrollinginterest at acquisition was $740,000. The differential atacquisition was attributable to the following items:

Inventory (sold in 20X2)	$	40,000
Land		56,000
Goodwill		64,000
Total Differential	$	160,000

During 20X2, Prince sold a plot of land that it had purchasedseveral years before to Sword at a gain of $22,400; Sword continuesto hold the land. In 20X6, Prince and Sword entered into afive-year contract under which Prince provides managementconsulting services to Sword on a continuing basis; Sword paysPrince a fixed fee of $85,000 per year for these services. AtDecember 31, 20X8, Sword owed Prince $21,250 as the final 20X8quarterly payment under the contract.

On January 2, 20X8, Prince paid $240,000 to Sword to purchaseequipment that Sword was then carrying at $280,000. Sword hadpurchased that equipment on December 27, 20X2, for $420,000. Theequipment is expected to have a total 15-year life and no salvagevalue. The amount of the differential assigned to goodwill has notbeen impaired.

At December 31, 20X8, trial balances for Prince and Sword appearedas follows:

	Prince Corporation									Sword Distributors Inc.
Item	Debit				Credit					Debit				Credit
Cash		$	64,700								$	52,000
Current Receivables			105,800									93,400
Inventory			288,000									220,900
Investment in Sword Distributors			2,910,100
Land			408,000									1,207,000
Buildings & Equipment			2,440,000									3,040,000
Cost of Goods Sold			2,191,000									513,000
Depreciation & Amortization			195,000									71,000
Other Expenses			1,366,000									217,000
Dividends Declared			42,000									12,000
Accumulated Depreciation						$	1,090,000								$	417,000
Current Payables							89,200									255,300
Bonds Payable							902,000									187,000
Common Stock							94,000									950,000
Additional Paid-in Capital							1,270,000									1,300,000
Retained Earnings, January 1							1,466,800									1,350,000
Sales							4,850,100									992,000
Other Income or Loss							97,000					25,000
Income from Sword Distributors							151,500
Total		$	10,010,600			$	10,010,600				$	5,451,300			$	5,451,300

As of December 31, 20X8, Sword had declared but not yet paid itsfourth-quarter dividend of $5,000. Both companies use straight-linedepreciation and amortization. Prince uses the fully adjustedequity method to account for its investment in Sword.

Required:
a. Compute the amount of the differential as of January 1,20X8.
  

b. Verify the balance in Prince’s Investment in Sword Distributorsaccount as of December 31, 20X8.
  

c. Present all consolidation entries that would appear in athree-part consolidation worksheet as of December 31, 20X8.(If no entry is required for a transaction/event, select"No journal entry required" in the first account field. Round youranswers to nearest whole dollar amount.)
  

d. Prepare and complete a three-part worksheet for the preparationof consolidated financial statements for 20X8. (Values inthe first two columns (the "parent" and "subsidiary" balances) thatare to be deducted should be indicated with a minus sign, while allvalues in the "Consolidation Entries" columns should be entered aspositive values. For accounts where multiple adjusting entries arerequired, combine all debit entries into one amount and enter thisamount in the debit column of the worksheet. Similarly, combine allcredit entries into one amount and enter this amount in the creditcolumn of the worksheet.)