On January 1, 2017, James Company purchased 100 percent of the outstanding voting stock of Nolan, Inc., for $1,000,000 in cash and other consideration. At the purchase date, Nolan had common stock of $500,000 and retained earnings of $185,000. James attributed the excess of acquisition-date fair value over Nolans book value to a trade name with an estimated 25-year remaining useful life. James uses the equity method to account for its investment in Nolan.

During the next two years, Nolan reported the following:

	Income	Dividends Declared	Inventory Transfers to James at Transfer Price
2017	$78,000	$25,000	$190,000
2018	85,000	27,000	210,000

Nolan sells inventory to James after a markup based on a gross profit rate. At the end of 2017 and 2018, 30 percent of the current year purchases remain in Jamess inventory.

Required

Create an Excel spreadsheet that computes the following:

1. Equity method balance in James Investment in Nolan, Inc., account as of December 31, 2018.

2. Worksheet adjustments for the December 31, 2018, consolidation of James and Nolan.

Formulate your solution so that Nolans gross profit rate on sales to James is treated as a variable.