On January 1, 2017, Pharma Company Purchased a 90% Interest

Essay

On January 1, 2017, Pharma Company purchased a 90% interest in Sandy Company for $2,800,000. At that time, Sandy had $1,840,000 of common stock and $360,000 of retained earnings. The difference between implied and book value was allocated to the following assets of Sandy Company: The plant and equipment had a 10-year remaining useful life on January 1, 2017.
During 2017, Pharma sold merchandise to Sandy at a 20% markup above cost. At December 31, 2017, Sandy still had $180,000 of merchandise in its inventory that it had purchased from Pharma. In 2017, Pharma reported net income from independent operations of $1,600,000, while Sandy reported net income of $600,000.
Required:
A. Prepare the workpaper entry to allocate, amortize, and depreciate the difference between implied and book value for 2017.
B. Calculate controlling interest in consolidated net income for 2017.