On January 1, 2016, Plymouth Corporation acquired 80 percent of the outstanding voting stock of Sander Company in exchange for $1,200,000 cash. At that time, although Sander's book value was $925,000, Plymouth assessed Sander's total business fair value at $1,500,000. Since that time, Sander has neither issued nor reacquired any shares of its own stock.

The book values of Sander's individual assets and liabilities approximated their acquisition-date fair values except for the patent account, which was undervalued by $350,000. The undervalued patents had a five-year remaining life at the acquisition date. Any remaining excess fair value was attributed to goodwill. No goodwill impairments have occurred.

Sander regularly sells inventory to Plymouth. Below are details of the intra-entity inventory sales for the past three years:

Separate financial statements for these two companies as of December 31, 2018, follow:

a. Prepare a schedule that calculates the Equity in Earnings of Sander account balance. 

b. Prepare a worksheet to arrive at consolidated figures for external reporting purposes. At year-end, there are no intra-entity payables or receivables?

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Gross Profit Rate on Intra-Entity Inventory Transfers 25% 28 25 Intra-Entity Ending Inventory at Transfer Price Intra-Entity Sales $125,000 220,000 300,000 Year 2016 2017 2018 $ 80.000 125,000 160,000 Plymouth Sander Revenues Cost of goods sold Depreciation expense Amortization expense Interest expense Equity in earnings of Sander Net income (1740,000) (950,000) 500,000 85,000 220,000 120,000 15,000 00) 04,000 20,000 PlymouthSander Net income Dividends declared $(2,800,000) (345,000) 700000 (230,000 25,000 200,000 Retained earnings, 12/31/18 Cash Accounts receivable Inventory Investment in Sander Buildings and equipment Patents Total assets $(3,300,000) S(550,000) 535,000 115,000 75,000 15,000 90,000800,000 1,420,000 025,000863,000 16 8830 5,495.000 2,100,000 Accounts payable Notes payable Common stock Additional paid-in capital Retained earnings, 12/31/18 (450,000) S (200,000) 545,000 (450,000) 900,000 (800,000) 300,000) 100,000) 3,300,000)550,000) $/(5,495,000) $2,100,000)