On January 1, 2010, Pierson Corporation exchanged $1,710,000 cash for 90 percent of the outstanding voting stock of Steele Company. The consideration transferred by Pierson provided a reasonable basis for assessing the total January 1, 2010, fair value of Steele Company. At the acquisition date, Steele reported the following owner’s equity amounts in its balance sheet:

Common stock	$400,000
Additional paid-in capital	60,000
Retained earnings	265,000

In determining its acquisition offer, Pierson noted that the values for Steele’s recorded assets and liabilities approximated their fair values. Pierson also observed that Steele had developed internally a customer base with an assessed fair value of $800,000 that was not reflected on Steele’s books. Pierson expected both cost and revenue synergies from the combination.

At the acquisition date, Pierson prepared the following fair-value allocation schedule:

Fair value of Steele Company	$1,900,000
Book value of Steele Company	725,000
Excess fair value	1,175,000
to customer base (10-year remaining life)	800,000
to goodwill	$ 375,000

At December 31, 2011, the two companies report the following balances:

Pierson	Steele
Revenues	(1,843,000)	(675,000)
Cost of goods sold	1,100,000	322,000
Depreciation expense	125,000	120,000
Amortization expense	275,000	11,000
Interest expense	27,500	7,000
Equity in income of Steele	(121,500)
Net income	(437,000)	(215,000)
Retained earnings, 1/1	(2,625,000)	(395,000)
Net income	(437,000)	(215,000)
Dividends paid	350,000	25,000
Retained earnings, 12/31	(2,712,000)	(585,000)
Current assets	1,204,000	430,000
Investment in Steele	1,854,000
Buildings and equipment	931,000	863,000
Copyrights	950,000	107,000
Total assets	4,939,000	1,400,000
Accounts payable	(485,000)	(200,000)
Notes payable	(542,000)	(155,000)
Common stock	(900,000)	(400,000)
Additional paid-in capital	(300,000)	(60,000)
Retained earnings, 12/31	(2,712,000)	(585,000)
Total liabilities and equities	(4,939,000)	(1,400,000)

a. Using the acquisition method, determine the consolidated balances for this business combination as of December 31, 2011.

b. If instead the noncontrolling interest’s acquisition-date fair value is assessed at $152,500, what changes would be evident in the consolidated statements?