"Problem 5-4 (LO 2) 80%, for 400000. straight-line bonds purchased this year, inven-tory prots. Refer to the preceding facts for Pontiacs acquisition of 80% of Starks commonstock and the bond transactions. Pontiac uses the simple equity method to account for itsinvestment in Stark. On January 1, 2015, Stack held merchandise acquired from Pontiacfor $15,000. During 2015, Pontiac sold $50,000 worth of merchandise to Stark. Stark held$20,000 of this merchandise at December 31, 2015. Stark owed Pontiac $10,000 onDecember 31 as a result of these intercompany sales. Pontiac has a gross prot rate of30%. Pontiac and Stark had the trial balances on December 31, 2015, shown on next page."

Please prepare the value anaylsis, D/D schedule and worksheet enteries in journal entry format

UuIunice JiCOI January 1, 2014 Assets Liabilities and Equity Accounts receivable ........ $ 40,000 Accounts payable .......... $ 42,297 Inventory .... 20,000 Bonds payable ............ 100,000 Land...... 35,000 Discount on bonds payable... 12,297) Buildings .............. 250,000 Common stock ($10 par)..... 10,000 Accumulated depreciation ... (50,000) Paid-in capital in excess of par 90,000 Equipment 120,000 Retained earnings ........... 115,000 Accumulated depreciation ... (60,000) Total assets.............. $355,000 Total liabilities and equity.. $355,000 Buildings (20-year life) are undervalued by $80,000. Equipment (5-year life) is undervalued by $50,000. Any remaining excess is considered to be goodwill. Stark issued $100,000 of 8%, 10-year bonds for $96,719 on January 1, 2011. Annual interest is paid on December 31. Pontiac purchased the bonds on January 1, 2015, for $104,770. Both companies use the straight-line method to amortize the premium/dis- count on the bonds. Pontiac and Stark used the following bond amortization schedules: Stark Interest Pontiac Interest Cash Cash Balance Period 1/2011 1/2012 1/2013 1/2014 1/2015 1/2016 1/2017 1/2018 1/2019 1/2020 1/2021 $8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 $8,328 8,328 8,328 8,328 8,328 8,328 8,328 8,328 8,328 8,328 Balance Period $ 96,719 1/2011 97,047 1/2012 97,375 1/2013 97,7031/2014 98,031 1/2015 9 8,359 1/2016 9 8,687 1/2017 99,015 1/2018 99,343 1/2019 9 9,671 1/2020 100,000* 1/2021 $8,000 8,000 8,000 8,000 8,000 8,000 $7,205 7,205 7,205 7,205 7,205 7,205 $104,770 103,975 103,180 102,385 101,590 100,795 100,000 Pontiac Company Stark Company 32,031 60,000 30,000 45,000 ! ! ! ! 17.870 90,000 100,000 150,000 435,738 103,975 500,000 (300,000) 200,000 (100,000) 155,000) ! ! ! Casb.. . Accounts Receivable.--. Inventory......... . Land... --- Investment in Stark..... . Investment in Stark Bonds Buildings....... .. Accumulated Depreciation..... Equipment... . . . Accumulated. Depreciation Accounts Payable.-.-.- Bands Payable... Discount on Bonds Payable ---- Common Stock Paid la Capitalin Excess of Par Retained Earnings, January 1, 2015 Sales ------------- Cost of Goods Sold................ Depreciation Expense-Buildings..... Depreciation Expense-Equipment. Other Expenses. Interest Revenue.. -- - Interest Expense.. . Subsidiary Income.-- Dividends Declared..... Totals ALCALAWAV 250,000 (70,000) 120,000 (84,000) (25.000) 1100,000) 1641 (10,000) 190,000) 1145.000) 1220,000) 120,000 10,000 12,000 45,000 ! ! ! 11.00,000) 1600,000) 1400,000) (600,000) 410,000 30,000 15,000 102,360 (7.205) ! ! ! 1 8.328 ) 1 119.738) 20,000 10,000 ! UuIunice JiCOI January 1, 2014 Assets Liabilities and Equity Accounts receivable ........ $ 40,000 Accounts payable .......... $ 42,297 Inventory .... 20,000 Bonds payable ............ 100,000 Land...... 35,000 Discount on bonds payable... 12,297) Buildings .............. 250,000 Common stock ($10 par)..... 10,000 Accumulated depreciation ... (50,000) Paid-in capital in excess of par 90,000 Equipment 120,000 Retained earnings ........... 115,000 Accumulated depreciation ... (60,000) Total assets.............. $355,000 Total liabilities and equity.. $355,000 Buildings (20-year life) are undervalued by $80,000. Equipment (5-year life) is undervalued by $50,000. Any remaining excess is considered to be goodwill. Stark issued $100,000 of 8%, 10-year bonds for $96,719 on January 1, 2011. Annual interest is paid on December 31. Pontiac purchased the bonds on January 1, 2015, for $104,770. Both companies use the straight-line method to amortize the premium/dis- count on the bonds. Pontiac and Stark used the following bond amortization schedules: Stark Interest Pontiac Interest Cash Cash Balance Period 1/2011 1/2012 1/2013 1/2014 1/2015 1/2016 1/2017 1/2018 1/2019 1/2020 1/2021 $8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 $8,328 8,328 8,328 8,328 8,328 8,328 8,328 8,328 8,328 8,328 Balance Period $ 96,719 1/2011 97,047 1/2012 97,375 1/2013 97,7031/2014 98,031 1/2015 9 8,359 1/2016 9 8,687 1/2017 99,015 1/2018 99,343 1/2019 9 9,671 1/2020 100,000* 1/2021 $8,000 8,000 8,000 8,000 8,000 8,000 $7,205 7,205 7,205 7,205 7,205 7,205 $104,770 103,975 103,180 102,385 101,590 100,795 100,000 Pontiac Company Stark Company 32,031 60,000 30,000 45,000 ! ! ! ! 17.870 90,000 100,000 150,000 435,738 103,975 500,000 (300,000) 200,000 (100,000) 155,000) ! ! ! Casb.. . Accounts Receivable.--. Inventory......... . Land... --- Investment in Stark..... . Investment in Stark Bonds Buildings....... .. Accumulated Depreciation..... Equipment... . . . Accumulated. Depreciation Accounts Payable.-.-.- Bands Payable... Discount on Bonds Payable ---- Common Stock Paid la Capitalin Excess of Par Retained Earnings, January 1, 2015 Sales ------------- Cost of Goods Sold................ Depreciation Expense-Buildings..... Depreciation Expense-Equipment. Other Expenses. Interest Revenue.. -- - Interest Expense.. . Subsidiary Income.-- Dividends Declared..... Totals ALCALAWAV 250,000 (70,000) 120,000 (84,000) (25.000) 1100,000) 1641 (10,000) 190,000) 1145.000) 1220,000) 120,000 10,000 12,000 45,000 ! ! ! 11.00,000) 1600,000) 1400,000) (600,000) 410,000 30,000 15,000 102,360 (7.205) ! ! ! 1 8.328 ) 1 119.738) 20,000 10,000