On January 1, 2023, Payne Company bought a 15 percent interest in Scout Company. The acquisition price of $184,500 reflected an assessment that all of Scout’s accounts were fairly valued within the company’s accounting records. During 2023, Scout reported net income of $100,000 and declared cash dividends of $30,000. Payne possessed the ability to significantly influence Scout’s operations and, therefore, accounted for this investment using the equity method.On January 1, 2024, Payne acquired an additional 80 percent interest in Scout and provided the following fair-value assessments of Scout’s ownership components:

Also, as of January 1, 2024, Payne assessed a $400,000 value to an unrecorded database internally developed by Scout. The database is anticipated to have a remaining life of four years. Scout’s other assets and liabilities were judged to have fair values equal to their book values. Payne elects to continue applying the equity method to this investment for internal reporting purposes.

At December 31, 2024, the following financial information is available for consolidation:

a. How should Payne allocate Scout’s total acquisition-date fair value (January 1, 2024) to the assets acquired and liabilities assumed for consolidation purposes?b. Show how the following amounts on Payne’s pre-consolidation 2024 statements were derived:∙ Equity in earnings of Scout∙ Gain on revaluation of Investment in Scout to fair value∙ Investment in Scoutc. Prepare a worksheet to consolidate the financial statements of these two companies as of December 31, 2024.

At year-end, there were no intra-entity receivables or payables.

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Consideration transferred by Payne for 80% interest Fair value of Payne's 15% previous ownership Noncontrolling interest's 5% fair value ... Total acquisition-date fair value for Scout Company. $1,400,000 262,500 87,500 $1,750,000