On October 1, 2010, Madison Ltd. acquired all the shares of Dobson Ltd. for $849,600. On that date, Dobson's statement of financial position showed share capital of $540,000 and retained earnings of $273,600. In addition, at the acquisition date, all of Dobson's identifiable assets and liabilities had carrying values that equaled their fair values.

Madison and Dobson's financial statements for September 30, 2014 are presented below:
Statement of Financial Position

As of September 30, 2014   

Madison Ltd. Dobson Ltd.

Assets:

Current assets:

Cash $    144,000               $    131,400

Short-term investments 27,000                      122,400

Accounts receivable 18,000                      540,000

Inventory 302,400                        64,800491,400                      858,600

Non-current assets:

Land 126,000                      216,000

Equipment, net 75,600                        27,000

Investment in Dobson 849,600                      ___-___

1,051,200                     243,000

1,542,600                  1,101,600

Liabilities and shareholders' equity:

Current liabilities:

Accounts payable 9,000                        23,400

Non-current liabilities:

Deferred income taxes 93,600                        54,000

102,600                        77,400

Shareholders' equity:  

Share capital 900,000                      540,000

Retained earnings 540,000                      484,200

1,440,000                1,024,200

$1,542,600                $1,101,600

Statement of Income

For the year ended September 30, 2014
                                                                                                Madison Ltd.             Dobson Ltd.
Sales revenue                                                                      $ 2,152,500               $ 1,670,400

Cost of sales                                                                            1,598,400                  1,207,225

Gross profit                                                                                  554,100                      463,175

Expenses:

Salaries and benefits                                                               103,500                         57,600

Amortization 9,360                           8,640

Other 7,200                         __-___                                                                                                     120,060            

            66,240

Other revenues and expenses:

Investment income                                                                         300                            1,225

Loss on disposal of asset                                                   

       (1,800)                         __-___                                                                                                     432,540          

            398,160Income tax expense                                                                             173,016                      

213,264   

Net income                                                                            $ 259,524                $    184,896  

Statement of Changes in Equity

For the year ended September 30, 2014                                                                                                

                                                                                             Dobson Ltd.            Madison Ltd.  

Share capital, October 1, 2013                                          $   900,000               $   540,000

Changes during the year                                                        ___-___                    ___-___

Share capital, September 30, 2014                                       900,000                     540,000

Retained earnings, October 1, 2013                                     424,476                     299,304

Net income                                                                                 259,524                     184,896

Dividends declared                                                                  (144,000)                     ______

Retained earnings, September 30, 2014 540,000                     484,200                                                                     

                          $ 1,440,000              $ 1,024,200

Additional information:

Both companies use a perpetual inventory system, have a September 30 year-end, and a 30% tax rate. Madison uses the entity theory method for consolidation.

On June 30, 2014, Madison sold some equipment to Dobson for $10,800. At that date, the net book value of the equipment to Madison was $12,600. The equipment is expected to have a remaining useful life of 10 years.
On April 1, 2014, Madison purchased $90,000 of merchandise from Dobson. Dobson had acquired the goods for $54,000. On July 15, Madison sold half of the goods to a customer for $50,400. The remaining goods were still in Madison's inventory at its 2014 fiscal year-end.

At October 1, 2013, Madison had some goods in inventory that it had purchased from Dobson at May 25, 2013. The profit on these goods was $10,800. These goods were sold by December 31, 2013.
In 2011, Madison sold a tract of land to Dobson for an accounting gain of $36,000. Dobson plans to build a warehouse and office complex on the land in 2015.

Required:

Prepare Madison's consolidated financial statements for the year ended September 30, 2014. (Round numbers to the nearest dollar, and show all your calculations.)