On January 1, 2019, Pump Company acquired all the outstanding common stock of Sound Company for $556,000 in cash. Financial data relating to Sound Company on January 1, 2019, are presented here:

Sound Company would expect to pay 10% interest to borrow long-term funds on the date of acquisition. During 2019, Sound Company wrote its receivables down by $10,690 and recorded a corresponding loss. Sound Company accounts for its inventories at lower of FIFO cost or market. Its buildings and equipment had a remaining estimated useful life on January 1, 2019, of 10 years and 2 1/2 years, respectively. Sound Company reported net income of $80,000 and declared no dividends in 2019.

Required:

A. Prepare in general journal form the December 31, 2019, workpaper entries necessary to eliminate the investment account and to allocate and depreciate the difference between book value and the value implied by the purchase price.

B. Assume that Pump Company?s net income from independent operations in 2019 amounts to $500,000. Calculate the controlling interest in consolidated net income for 2019.

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Balance Sheet Book Value Fair Value $ 104,550 $ 104,550 Cash Receivables 123,000 112,310 Inventories 220,000 268,000 Buildings Accumulated depreciation-buildings 331,000 375,000 (264,800) (300,000) Equipment 145,000 130,000 Accumulated depreciation equipment (108,750) (97,500) Land 150,000 420,000 $ 700,000 Total assets $1,012,360 Book Value Fair Value $ 106,000 Current liabilities Bonds payable, 8% due 1/1/2028 Interest payable on 6/30 and 12/31 Common stock Premium on common stock Retained earnings Total liabilities and equities $106,000 300,000 200,000 80,000 14,000 $700,000