Question: On January 1, 2014, Pluto Company acquired all of Saturn Company's common stock for $1,000,000 cash. On that date, Saturn had retained earnings of $200,000 and common stock of $600,000. The book values of Saturn's assets and liabilities were equal to fair values except for the following:

                                     Book Value                   Fair Value

Equipment                        $200,000                    $220,000

Land                                 250,000                      300,000

Additional Information: 1. The equipment had an estimated remaining useful life of five years at acquisition.

2. Goodwill was not impaired at December 31, 2014, but was impaired by $25,000 at December 31, 2015.

3. Reported income for Pluto (excluding equity income from Saturn's earnings) and Saturn follows:

                                        Pluto                         Saturn

Year 2014                        $500,000                    $200,000

Year 2015                        $350,000                    $100,000

Required: 1. Prepare the January 1, 2014, journal entry on Pluto's books to record the acquisition of Saturn.

2. Prepare the elimination entries needed to prepare a consolidated balance sheet immediately after acquisition.

3. Calculate consolidated income for 2014 and 2015.