Catbird Corporation paid $240,000 on April 1, 2006 for all of the common stock of Bug Corporation in a business acquisition. Bug's stockholders' equity at April 1 consisted of the $195,000 January 1, 2006 stockholders' equity of Bug plus first quarter income less dividends. Dividends are paid quarterly. Any excess cost over book value acquired is allocated to goodwill.Catbird sold equipment with a 5-year remaining useful life to Bug on Oct 1, 2006 for a gain of $10,000. Depreciation overcharged as result for period was $ 500.
Bug's accounts payable balance at December 31 includes $5,000 due to Catbird from the sale of equipment.
Catbird accounts for its investment in Bug using the equity method as a one-line consolidation.
Complete the working papers to consolidate the financial statements of Catbird and Bug Corporations for the year 2006.