On January 1, 2023, Pulaski, Incorporated, acquired a 60 percent interest in the common stock of Sheridan, Incorporated, for $327,000. Sheridan's book value on that date consisted of common stock of $100,000 and retained earnings of $193,400. Also, the acquisition-date fair value of the 40 percent noncontrolling interest was $218,000. The subsidiary held patents (with a 10-year remaining life) that were undervalued within the company's accounting records by $72,700 and also had unpatented technology (15-year estimated remaining life) undervalued by $48,600. 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	$122,700	$153,375	$51,125
2024	$113,400	$151,200	$37,800

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

Items	Pulaski, Inc.	Sheridan, Inc.
Sales	$(708,000)	$(347,000)
Cost of goods sold	$465,300	$212,200
Operating expenses	$191,585	$72,400
Equity in earnings in Sheridan	$(31,909)	$0
Net income	$(83,024)	$(62,400)
Retained earnings, 1/1/24	$(742,300)	$(280,900)
Net income	$(83,024)	$(62,400)
Dividends declared	$46,000	$15,900
Retained earnings, 12/31/24	$(779,324)	$(327,400)
Cash and receivables	$265,700	$149,100
Inventory	$249,600	$129,900
Investment in Sheridan	$385,338	$0
Buildings (net)	$318,000	$203,200
Equipment (net)	$227,100	$86,800
Patents (net)	$0	$21,000
Total assets	$1,445,738	$590,000
Liabilities	$(366,414)	$(162,600)
Common stock	$(300,000)	$(100,000)
Retained earnings, 12/31/24	$(779,324)	$(327,400)
Total liabilities and equities	$(1,445,738)	$(590,000)

Note: Parentheses indicate a credit balance.

Required:

a. Show how Pulaski determined the $385,338 Investment in Sheridan account balance. Assume that Pulaski defers 100 percent of downstream intra-entity profits against its share of Sheridan's income.

Consideration transferred		$327,000
Increase in Sheridan's retained earnings
Excess fair value amortization x 60%	$(6,306)
2023 ending inventory profit deferral	$(10,225)
Pulaski's equity in earnings of Sheridan		$31,909
Sheridan 2024 dividends declared to Pulaski
Investment account balance 12/31/24		$385,338

b. Show a consolidated worksheet to determine appropriate balances for external financial reporting as of December 31, 2024.

Items	Pulaski, Inc.	Sheridan, Inc.	Consolidated Entries	Non Controlling Interest	Consolidated Totals
Debit	Credit
Sales	$(708,000)	$(347,000)	$151,200			$(903,800)
Cost of goods sold	$465,300	$212,200	$9,450	$161,425		$525,525
Operating expenses	$191,585	$72,400	$10,510			$274,495
Equity in earnings in Sheridan	$(31,909)	$0	$31,909			$0
Separate Company Net income	$(83,024)	$(62,400)				$(103,780)
Consolidated Net Income
To noncontrolling interest					$(20,756)	$20,756
To Pulaski						$(83,024)
Retained earnings, 1/1/24	$(742,300)	$(280,900)	$280,900			$(742,300)
Net income	$(83,024)	$(62,400)				$(83,024)
Dividends declared	$46,000	$15,900				$46,000
Retained earnings, 12/31/24	$(779,324)	$(327,400)				$(779,324)
Cash and receivables	$265,700	$149,100				$414,800
Inventory	$249,600	$129,900		$9,450		$370,050
Investment in Sheridan	$385,338	$0				$0
Buildings (net)	$318,000	$203,200				$521,200
Equipment (net)	$227,100	$86,800				$313,900
Patents (net)	$0	$21,000	$65,430	$7,270		$79,160
Unpatented technology			$45,360	$3,240		$42,120
Trade name
Total assets	$1,445,738	$590,000
Liabilities	$(366,414)	$(162,600)				$(529,014)
Common stock	$(300,000)	$(100,000)	$100,000			$(300,000)
Noncontrolling Interest 1/1	$0	$0
Noncontrolling Interest 12/31	$0	$0
Retained earnings, 12/31/24	$(779,324)	$(327,400)				$(779,324)
Total liabilities and equities	$(1,445,738)	$(590,000)				$(1,741,230)