On Jan 1, 2017, Wooldrik Inc., acquired 60% interest in the common stock of Varvik Inc. for $372,000. Varvik’s book value consisted of common stock of $100,000 and RE of $220,000. Also, the acquisition-date fair value of the 40% non-controlling interest was $248,000. The sub held patents (with a 10y remaining life) that were undervalued within the company’s accounting records by $70,000 and a customer list (15y remaining life) assessed at a $45,000 fair value. Any remaining excess of acquisition-date fair value was assigned to goodwill. Since the acquisition, Wooldrik has applied equity method to its Investment in Varvik account and not goodwill impairment has occurred. At the 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 Wooldrik	Transfer Price to Varvik	Ending Balance (at transfer price)
2017	120,000	150,000	50,000
2016	112,000	160,000	40,000

The individual financial statements for these two companies as of December 31, 2018 and the year then ended follow:

	Wooldrik Inc	Varvik Inc.
Sales	-700,000	-335,000
COGS	460,000	205,000
Operating expenses	188,000	70,000
Equity in earnings in Varvik	-28,000	0
Net income	-80,000	-60,000
RE, 1/1/18	-695,000	-280,000
Net income	-80,000	-60,000
Dividends declared	45,000	15,000
RE, 12/31/18	-730,000	-325,000
Cash and receivables	248,000	148,000
Inventory	233,000	129,000
Investment in Varvik	411,000	0
Buildings (net)	308,000	202,000
Equipment (net)	220,000	86,000
Patents (net)	0	20,000
Liabilities	-390,000	-160,000
Common stock	-300,000	-100,000
RE, 12/31/18	-730,000	-325,000
Total assets – liabilities & equity	0	0

Q1.

Show how Wooldrik determined the $411,000 Investment in Varvik account balance. Assume that Wooldrik defers 100% of downstream intra-entity profits against its share of Varvik’s income.

Q2.

Write a worksheet to prepare the consolidated balance sheet and consolidated P&L statement for external financing reporting as of December 31, 2018.