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Problem 5-32 (LO 5-2, 5-3, 5-4, 5-5) On January 1, 2013, Plymouth Corporation acquired 00 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 5-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: lntra-Entity Year Sales 201 3 $125,000 2014 220,000 201 5 300,000 Intro-Entity Ending Inventory on Intro-Entity at Transfer Price Inventory Transfers $ 80,000 125.000 160.000 Gross Prot Rate 25% 28% 25% Separate nancial statements for these two companies as of December 31. 2015, follow: Revenues Cost of goods sold Depreciation expense Amortization expense Interest expense Equity in earnings of Sander Net income Retained eamings 1m15 Net income Dividends declared Plymouth Sander $ (1,?40,000) $ (050,000) 820,000 500,000 104,000 35,000 220,000 120,000 20,000 15,000 (124,000) 0 $ (700,000) $ (230,000) $ (2, 800,000) $ (345,000) (?00,000) (230,000) 200,000 25,000 Cash $ 535,000 $ 115.000 Accounts receivable 575,000 215,000 Inventory 900,000 300,000 Investment in Sander 1,420,000 0 Buildings and equipment 1,025,000 363,000 Patents 950,000 107,000 Total assets $ 5,495,000 $ 2.100.000 Accounts payable 5 (450,000) $ (200,000) Notes payable (545,000) (450,000) Common stock 5 (900,000) $ (300,000) Additional paid-in capital (300,000) (100,000) Retained earnings 12131115 (3,300,000) (550,000) Total liabilities and stockholders\" equity 5; (5,405,000) $ (2,100,000) a. Prepare a schedule that calculates the Equity in Earnings of Sander account balance. 2015 income reported by Sander Excess patent fair value amortization Deferred gross profit for 12iS1I15 intra-entity inventory Recognized gross prot for 1i'1i'15 intra-entity inventory Sander's net income adjusted To controlling interest To nonoontrolling interest b. Prepare a worksheet to arrive at consolidated gures for external reporting purposes. At year end, there are no intro-entity payables or reoelvables.(For accounts where multiple consolidation entries are required, combine all debit entries Into one amount and enter this amount In the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount In the credit column of the worksheet.) Revenues $ (1 140,000) (950,000) Cast of goods sold 820,000 500,000 Depreciation expense 104,000 05,000 Amortization expense 220,000 120,000 Interest expense 20,000 15,000 Equity in earnings of Sander (124,000) 0 Separate company net income (700,000) (230,000) Consolidated net income To nencontrolling interest To controlling interest Retained eamlngs, 1:1 $ (2,300,000) (345,000) Net income (700,000) (230,000) Dividends declared 200,000 25,000 Retained eamlngs, 1231 $ 3,300,000 (550,000) Cash $ 535,000 115,000 Accounts receivable 575,000 215,000 Inventory 990,000 800,000 Investment in Sander 1,420,000 Investment in Sander 1.420.000 Buildings and equipment 1.025.000 303.000 Patents 950.000 107.000 Goodwill Total assets 1 5.495.000 $ 2.100.000 Accounts payable 0 (450.000) $ (200,000) Notes payable (545.000) (450,000) NCI In Sander 1l'1 NCI In Sander 1231 Common stock (900.000) (800.000) APIC (300.000) (100.000) Retained earnings, 12131 (3.300.000) (550,000) Total liabilities and stockholders' equity $ (5.495.000) $ (2.100.000) References eBook 8. Resources Problem Learning Objective: 05-02 Demonstrate the consolidation procedures to eliminate intraaentity sales and purchases balances. Learning Objective: 05-05 Explain the difference bemeen upstream and downstream intra-enty transfers and how each affects the computation of nonoontrolling inmreet balances. Dmhlam 5.19 H n 5.9 5.2 I naminn num HM?! Fumlain