Assume that the parent company acquires its subsidiary on January 1, 2016, by exchanging 31,500 shares of its $1 par value Common Stock, with a market value on the acquisition date of $44 per share, for all of the outstanding voting shares of the acquiree. You have been charged with preparing the consolidation of these two companies at the end of the first year. On the acquisition date, all of the subsidiary’s assets and liabilities had fair values equaling their book values. Following are financial statements of the parent and its subsidiary for the year ended December 31, 2016.

Parent Subsidiary Parent Subsidiary
Income statement Balance sheet
Sales $3,330,000 $1,890,000 Assets
Cost of goods sold (2,331,000) (1,134,000) Cash $789,660 $486,990
Gross profit 999,000 756,000 Accounts- 426,240 438,480
receivable
Equity income 39,690 - Inventory 646,020 563,220
Operating expenses (632,700) (491,400) Equity- 1,260,000 -
investment
Net income $405,990 $264,600 Property, plant- 2,441,556 1,042,020
& equipment
Statement of retained earnings $5,563,476 $2,530,710
BOY retained- Liabilities and-
earnings 2,116,800 976,500 stockholders' equity
Net income 405,990 264,600 Accounts- $243,756 $180,180
payable
Dividends (126,180) (39,690) Accrued- 289,710 235,620
liabilities
Ending- $2,396,610 $1,201,410 Long-term- - 630,000
retained earnings liabilities
Common stock 466,200 126,000
APIC 2,167,200 157,500
Retained- 2,396,610 1,201,410
earnings
$5,563,476 $2,530,710

Required:
a. Prepare the journal entry to record the acquisition of the subsidiary.
b. Prepare the consolidation entries for the year ended December 31, 2016.