Workpaper Entries and Consolidated Net Income for Two Years, Cost Method On January 1 , 201 1, Palmero Company purchased an 80% interest in Santos Company for $2,800,000, at which time Santos Company had retained earnings of $1 ,000,000 and capital stock of $500,000. On the date of acquisition, the fair value of the assets and liabilities of San- tos Company was equal to their book value, except for property and equipment (net) , which had a fair value of $1,500,000 and a book value of $600,000. The property and equipment had an estimated remaining life of 1 0 years. Palmero Company reported net income from in- dependent operations of $400,000 in 2011 and $425,000 in 2012. Santos Company reported net income of $300,000 in 2011 and $400,000 in 201 2. Neither company declared dividends in 2011 or 201 2. Palmero uses the cost method to account for its investment in Santos.
Required:
A. Prepare in general journal form the entries necessary in the consolidated statements workpapers for the years ended December 31 , 201 1 and 2012.
B. Prepare a schedule or t-account showing the calculation of the controlling and noncon- trolling interest in consolidated net income for the years ended December 31 , 2011 and December 31 , 201 2.