On January $1,2023,$ Pulaski, Incorporated, acquired a $60$ percent interest in the common stock of Sheridan, Incorporated, for $$313,800.$ Sheridan's book value on that date consisted of common stock of $$100,000$ and retained earnings of $$185,500.$ Also, the acquisition$-$date fair value of the $40$ percent noncontrolling interest was $$209,200.$ The subsidiary held patents $($with a $10-$year remaining life$)$ that were undervalued within the company's accounting records by $$76,300$ and also had unpatented technology $(15-$year estimated remaining life$)$ undervalued by $$52,200.$ Any remaining excess acquisition$-$date fair value was assigned to an indefinite$-$lived trade name. Since acquisition, Pulaski has applied the equity method to its Investment in Sheridan account. At year$-$end, there are no intra$-$entity payables or receivables.

Intra$-$entity inventory sales between the two companies have been made as follows:

Year Cost to Pulaski Transfer Price to Sheridan Ending Balance $($at transfer price$)$

$2023$ $ $126,000$ $ $157,500$ $ $52,500$

$2024112,800150,40037,600$

The individual financial statements for these two companies as of December $31,2024,$ and the year then ended follow:

Items Pulaski, Incorporated Sheridan, Incorporated

Sales $ $(723,000)$ $ $(358,000)$

Cost of goods sold $475,200218,800$

Operating expenses $195,41074,600$

Equity in earnings in Sheridan $(33,194)0$

Net income $ $(85,584)$ $ $(64,600)$

Retained earnings, $1/1/24$ $ $(768,000)$ $ $(282,000)$

Net income $(85,584)(64,600)$

Dividends declared $47,40017,600$

Retained earnings, $12/31/24$ $ $(806,184)$ $ $(329,000)$

Cash and receivables $ $275,000$ $ $149,800$

Inventory $258,300130,600$

Investment in Sheridan $377,1680$

Buildings $($net$)333,000204,300$

Equipment $($net$)237,80088,000$

Patents $($net$)022,400$

Total assets $ $1,481,268$ $ $595,100$

Liabilities $ $(375,084)$ $ $(166,100)$

Common stock $(300,000)(100,000)$

Retained earnings, $12/31/24(806,184)(329,000)$

Total liabilities and equities $ $(1,481,268)$ $ $(595,100)$

Note: Parentheses indicate a credit balance.

Required:

a$.$ Show how Pulaski determined the $$377,168$ Investment in Sheridan account balance. Assume that Pulaski defers $100$ percent of downstream intra$-$entity profits against its share of Sheridan$$s income.

b$.$ PULASKI, INCORPORATED, AND SHERIDAN, INCORPORATED

Consolidation Worksheet

For Year Ending December $31,2024$Prepare a consolidated worksheet to determine appropriate balances for external financial reporting as of December $31,2024.$