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On January 1 , 2 0 2 3 , Pulaski, Incorporated, acquired a 6 0 percent interest in the common stock of Sheridan, Incorporated, for

On January 1,2023, Pulaski, Incorporated, acquired a 60 percent interest in the common stock of Sheridan, Incorporated, for $420,000. Sheridan's book value on that date consisted of common stock of $100,000 and retained earnings of $248,300. Also, the acquisition-date fair value of the 40 percent noncontrolling interest was $280,000. The subsidiary held patents (with a 10-year remaining life) that were undervalued within the company's accounting records by $87,100 and also had unpatented technology (15year estimated remaining life) undervalued by $63,000. Any remaining excess acquisition-date fair value was assigned to an indefinitelived 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. Show how Pulaski determined the $448,688 Investment in Sheridan account balance. Assume that Pulaski defers 100 percent
of downstream intra-entity profits against its share of Sheridan's income.
Note: Amounts to be deducted should be indicated with a minus sign.
Intra-entity inventory sales between the two companies have been made as follows:
\table[[,Cost to,Transfer Price,\table[[Ending Balance],[(at transfer]]],[Year,Pulaski,to Sheridan,price)],[2023,$138,000,$172,500,$57,500],[2024,112,800,150,400,37,600]]
The individual financial statements for these two companies as of December 31,2024, and the year then ended follow:
\table[[Items,\table[[Pulaski,],[Incorporated]],\table[[Sheridan,],[Incorporated]]],[Sales,$(760,000),$(399,000)],[Cost of goods sold,499,500,243,400],[Operating expenses,202,710,82,800],[Equity in earnings in Sheridan,(38,034),0],[Net income,$(95,824),$(72,800)],[\table[[Retained earnings, 1/1/24],[Net income],[Dividends declared]],\table[[\table[[$(829,700)],[(95,824)],[51,300]]]],\table[[\table[[$(286,100)],[(72,800)],[21,300]]]]],[Retained earnings, 12/31/24,$(874,224),$(337,600)],[Cash and receivables,$297,100,$153,700],[Inventory,279,100,133,900],[Investment in Sheridan,448,688,0],[Buildings (net),370,000,208,500],[Equipment (net),264,000,92,100],[Patents (net),0,26,800],[Total assets,$1,658,888,$615,000],[Liabilities,$(484,664),$(177,400)],[Common stock,(300,000),(100,000)],[Retained earnings, 12/31/24,(874,224),(337,600)],[Total liabilities and equities,$(1,658,888),$(615,000)]]
Note: Parentheses indicate a credit balance.
Required:
a. Show how Pulaski determined the $448,688 Investment in Sheridan account balance. Assume that Pulaski defers 100 percent of downstream intra-entity profits against its share of Sheridan's income.Required A
Prepare a consolidated worksheet to determine appropriate balances for external financial reporting as of December 31,2024.
Note: 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. Input all amounts as positive values.
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PULASKI, INCORPORATED, AND SHERIDAN, INCORPORATED
Consolidation Worksheet
For Year Ending December 31,2024
b. Prepare a consolidated worksheet to determine appropriate balances for external financial reporting as of December 31,2024.
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