Cost Method and Eliminating Entries Three Years After Acquisition

Puffin Industries acquired all of Sunset Coast Digital's stock on January $1,2014,$ for $$3,500,000,$$$2,100,000$ in excess of book value. At that time, Sunset Coast's inventory

$($LIFO$)$ was overvalued by $$500,000$ and its plant assets $(10-$year life$)$ were overvalued by $$1,000,000.$ The remaining excess of cost over book value is attributed to

undervalued identifiable intangible assets being amortized over $20$ years. Sunset Coast depreciates plant assets and amortizes intangibles by the straight$-$line method.

During the next three years Sunset Coast reported total net income of $$850,000$ and paid out $50$ percent in dividends. Puffin carries its investment in Sunset Coast using the

cost method. Sunset Coast's inventory increased each year since it was acquired by Puffin, and Sunset Coast's reported net income for $2016$ was $$200,000,$ and dividends

totaled $50$ percent of reported income.

Prepare the working paper eliminating entries needed in consolidation at December $31,2016.$