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 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 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: Intra-Entity Sales $ 125,000 220,000 300,000 Year 2016 2017 2018 Gross Profit Rate on Intra-Entity Inventory Transfers 25% 28 25 Intra-Entity Ending Inventory at Transfer Price $ 80,000 125,000 160,000 Separate financial statements for these two companies as of December 31, 2018, follow: a. Prepare a schedule that calculates the Equity in Earnings of Sander account balance. b. Prepare a worksheet to arrive at consolidated figures for external reporting purposes. At year end, there are no intra-entity payables or receivables. Complete this question by entering your answers in the tabs below. Required A Required B 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 Sander's net income adjusted To controlling interest To noncontrolling interest ( Required A RequiredB Required A Required B Prepare a worksheet to arrive at consolidated figures for external reporting purposes. At year end, there are no intra-entity payables or receivables. (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. Amounts in the Debit and Credit columns should be entered as positive. Negative amounts for the NCI and Consolidated Totals columns should be entered with a minus sign.) Show less A Accounts NCI Consolidated Totals $ Revenues Cost of goods sold Depreciation expense Amortization expense Interest expense Equity in earnings of Sander Separate company net income Consolidated net income To noncontrolling interest to Plymouth Corp. Retained earnings, 1/1 Net income PLYMOUTH AND SANDER Consolidation Worksheet For Year Ending December 31, 2018 Consolidation Entries Plymouth Sander Debit Credit (1,740,000) $ (950,000) 820,000 500,000 104,000 85,000 220,000 120,000 20,000 15,000 (124.000) (700,000) $ (230,000) $ $ $ (2,800,000) (700.000) (345,000) (230.000) 104,000 220,000 20,000 (124,000) (700,000) 85,000 120,000 15,000 $ $ (230,000) Depreciation expense Amortization expense Interest expense Equity in earnings of Sander Separate company net income Consolidated net income To noncontrolling interest to Plymouth Corp. Retained earnings, 1/1 Net income Dividends declared Retained earnings, 12/31 $ $ $ $ $ (2,800,000) (700,000) 200,000 (3,300,000) 535,000 575,000 990,000 1,420,000 1,025,000 950,000 (345,000) (230,000) 25,000 (550,000) 115,000 215,000 800,000 Cash 863,000 107,000 Accounts receivable Inventory Investment in Sander Buildings and equipment Patents Goodwill Total assets Accounts payable Notes payable Noncontrolling interest 1/1 Noncontrolling interest 12/31 Common stock APIC Retained earnings, 12/31 Total liab. and SE $ $ 5,495,000 (450,000) (545,000) $ $ 2,100,000 (200,000) (450,000) (900,000) (300,000) (3,300,000) (5,495,000) (800,000) (100,000) (550,000) (2,100,000) $ $ 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 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 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: Intra-Entity Sales $ 125,000 220,000 300,000 Year 2016 2017 2018 Gross Profit Rate on Intra-Entity Inventory Transfers 25% 28 25 Intra-Entity Ending Inventory at Transfer Price $ 80,000 125,000 160,000 Separate financial statements for these two companies as of December 31, 2018, follow: a. Prepare a schedule that calculates the Equity in Earnings of Sander account balance. b. Prepare a worksheet to arrive at consolidated figures for external reporting purposes. At year end, there are no intra-entity payables or receivables. Complete this question by entering your answers in the tabs below. Required A Required B 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 Sander's net income adjusted To controlling interest To noncontrolling interest ( Required A RequiredB Required A Required B Prepare a worksheet to arrive at consolidated figures for external reporting purposes. At year end, there are no intra-entity payables or receivables. (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. Amounts in the Debit and Credit columns should be entered as positive. Negative amounts for the NCI and Consolidated Totals columns should be entered with a minus sign.) Show less A Accounts NCI Consolidated Totals $ Revenues Cost of goods sold Depreciation expense Amortization expense Interest expense Equity in earnings of Sander Separate company net income Consolidated net income To noncontrolling interest to Plymouth Corp. Retained earnings, 1/1 Net income PLYMOUTH AND SANDER Consolidation Worksheet For Year Ending December 31, 2018 Consolidation Entries Plymouth Sander Debit Credit (1,740,000) $ (950,000) 820,000 500,000 104,000 85,000 220,000 120,000 20,000 15,000 (124.000) (700,000) $ (230,000) $ $ $ (2,800,000) (700.000) (345,000) (230.000) 104,000 220,000 20,000 (124,000) (700,000) 85,000 120,000 15,000 $ $ (230,000) Depreciation expense Amortization expense Interest expense Equity in earnings of Sander Separate company net income Consolidated net income To noncontrolling interest to Plymouth Corp. Retained earnings, 1/1 Net income Dividends declared Retained earnings, 12/31 $ $ $ $ $ (2,800,000) (700,000) 200,000 (3,300,000) 535,000 575,000 990,000 1,420,000 1,025,000 950,000 (345,000) (230,000) 25,000 (550,000) 115,000 215,000 800,000 Cash 863,000 107,000 Accounts receivable Inventory Investment in Sander Buildings and equipment Patents Goodwill Total assets Accounts payable Notes payable Noncontrolling interest 1/1 Noncontrolling interest 12/31 Common stock APIC Retained earnings, 12/31 Total liab. and SE $ $ 5,495,000 (450,000) (545,000) $ $ 2,100,000 (200,000) (450,000) (900,000) (300,000) (3,300,000) (5,495,000) (800,000) (100,000) (550,000) (2,100,000) $ $