On January 1, 2016, Plymouth Corporation acquired 80 percent of the outstanding voting stock of Sander Company in exchange for $1,200,000 cash. At that time, although Sanders book value was $925,000, Plymouth assessed Sanders 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 five-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:

Year	Intra-Entity Sales			Intra-Entity Ending Inventory at Transfer Price			Gross Profit Rate on Intra-Entity Inventory Transfers
2016	$	125,000		$	80,000			25	%
2017		220,000			125,000			28
2018		300,000			160,000			25

Separate financial statements for these two companies as of December 31, 2018, follow:

	Plymouth				Sander
Revenues	$	(1,740,000	)		$	(950,000	)
Cost of goods sold		820,000				500,000
Depreciation expense		104,000				85,000
Amortization expense		220,000				120,000
Interest expense		20,000				15,000
Equity in earnings of Sander		(124,000	)			0
Net income	$	(700,000	)		$	(230,000	)
Retained earnings 1/1/18	$	(2,800,000	)		$	(345,000	)
Net income		(700,000	)			(230,000	)
Dividends declared		200,000				25,000
Retained earnings 12/31/18	$	(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				0
Buildings and equipment		1,025,000				863,000
Patents		950,000				107,000
Total assets	$	5,495,000			$	2,100,000
Accounts payable	$	(450,000	)		$	(200,000	)
Notes payable		(545,000	)			(450,000	)
Common stock		(900,000	)			(800,000	)
Additional paid-in capital		(300,000	)			(100,000	)
Retained earnings 12/31/18		(3,300,000	)			(550,000	)
Total liabilities and stockholders' equity	$	(5,495,000	)		$	(2,100,000	)

A. Prepare a schedule that calculates the Equity in Earnings of Sander account balance.

2018 income reported by Sander
Excess patent fair value amortization
Deferred gross profit for 12/31/18 intra-entity inventory
Recognized gross profit for 1/1/18 intra-entity inventory
Sanders net income adjusted	$0
To controlling interest
To noncontrolling interest

B. Prepare a worksheet to arrive at consolidated figures for external reporting purposes. At year end, there are no intra-entity payables or receivables.

PLYMOUTH AND SANDER
Consolidation Worksheet
For Year Ending December 31, 2018
			Consolidation Entries
Accounts	Plymouth	Sander	Debit	Credit	NCI	Consolidated Totals
Revenues	$(1,740,000)	$(950,000)
Cost of goods sold	820,000	500,000
Depreciation expense	104,000	85,000
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						$0
To noncontrolling interest
to Plymouth Corp.						0
Retained earnings, 1/1	$(2,800,000)	$(345,000)
Net income	(700,000)	(230,000)
Dividends declared	200,000	25,000
Retained earnings, 12/31	$(3,300,000)	$(550,000)				$0
Cash	$535,000	$115,000
Accounts receivable	575,000	215,000
Inventory	990,000	800,000
Investment in Sander	1,420,000
Buildings and equipment	1,025,000	863,000
Patents	950,000	107,000
Goodwill
Total assets	$5,495,000	$2,100,000				$0
Accounts payable	$(450,000)	$(200,000)
Notes payable	(545,000)	(450,000)
Noncontrolling interest 1/1
Noncontrolling interest 12/31
Common stock	(900,000)	(800,000)
APIC	(300,000)	(100,000)
Retained earnings, 12/31	(3,300,000)	(550,000)
Total liab. and SE	$(5,495,000)	$(2,100,000)	$0	$0		$0