5. (20 pts) Flounder purchased 100% of Sole for $325,000 on Jan 1, 2020. On that date, Equipment was considered undervalue bye $60,000 and had a five year life, and other intangibles were overvalued by $10,000 and had a four year life. Book value of sole on that date was $150,000. Goodwill accounts for the rest of the excess.

Below are the income and dividends for 2020 for sole as reported. by sole:

2020

Income $50,000

Dividends $10,000

a. Prepare a schedule of distribution of excess of cost/ fair value at Jan 1, 2020 and any amortization of assets:

b. Using the equity method, record the entries of the books of Flounder below to reflect activity with Sole for 2020, including the original purchase.

Dr. Cr.

c. below are the balances of the accounts for Flounder and Sole at December 31,2020.

Prepare consolidation entries on the worksheet and complete the consolidated statements.

You must complete the Flounder balance sheet first.

Flounder. Sole. Dr Cr.

Sales 200,000. 185,000

Cost of sales 60,000 70,000

Operating Expenses 15,000 65,000

125,000. 50,000

Income from sole

Net income $50,000

Retained Earnings Jan 1 300,000. 80,000

Dividends. 30,000. 10,000

Retained earnings Dec 31 120,000

Cash 20,000 10,000

Accounts Receivable 30,000 5,000

Inventories 90,000 20,000

Investment in Sole

Property, plant, and equipment 220,000. 190,000

net of depreciation

Goodwill

other intangibles 30,000. 15,000

745,500 240,000

Accounts payable 90,000 25,000

Long term notes payable 70,000. 25,000

Common Stock 150,000. 70,000

Retained earnings 120,000

= 745,000 240,000