Scott Industries acquired all of Blues Coast Digitals stock on January 1, 2018, for $5,000,000, $3,600,000 in excess of book value. At that time, Blues Coasts inventory (LIFO) was overvalued by $400,000 and its plant assets (10-year life) were overvalued by $500,000. Previously unreported identifiable intangible assets were valued at $1,000,000, and amortized over 5 years. Goodwill from this acquisition was impaired by $100,000 in 2019. Blues Coast depreciates plant assets and amortizes intangibles by the straight-line method. During 2018 and 2019, Blues Coast reported total net income of $850,000 and paid out 50 percent in dividends. Scott carries its investment in Blues Coast using the complete equity method. Blues Coasts inventory increased each year since it was acquired by Scott, Blues Coasts reported net income for 2020 was $400,000, and dividends totaled 50 percent of reported income.

1.Compute Scotts 2020 equity in net income of Sunset Coast.

2. Compute the balance in the Investment in Blues Coast account at December 31, 2020, after all equity method entries have been booked.

3.Prepare the working paper eliminating entries needed in consolidation at December 31, 2020.

4. If Scott reports $1,500,000 net income from its own operations in 2020, what is consolidated net income for 2020?