On January $1,2023,$ Payne Company bought a $15$ percent interest in Scout Company. The acquisition price of $$207,500$ reflected an assessment that all of Scout$$s accounts were fairly valued within the company$$s accounting records. During $2023,$ Scout reported net income of $$112,300$ and declared cash dividends of $$33,600.$ Payne possessed the ability to significantly influence Scout$$s operations and, therefore, accounted for this investment using the equity method.

On January $1,2024,$ Payne acquired an additional $80$ percent interest in Scout and provided the following fair$-$value assessments of Scout$$s ownership components:

Consideration transferred by Payne for $80\%$ interest $ $1,424,000$

Fair value of Payne's $15\%$ previous ownership $267,000$

Noncontrolling interest's $5\%$ fair value $89,000$

Total acquisition$-$date fair value for Scout Company $ $1,780,000$

Also, as of January $1,2024,$ Payne assessed a $$417,000$ value to an unrecorded database internally developed by Scout. The database is anticipated to have a remaining life of four years. Scout$$s other assets and liabilities were judged to have fair values equal to their book values. Payne elects to continue applying the equity method to this investment for internal reporting purposes.

At December $31,2024,$ the following financial information is available for consolidation:

Items Payne Company Scout Company

Revenues $ $(970,600)$ $ $(403,000)$

Operating expenses $641,000243,800$

Equity earnings of Scout $(52,203)0$

Gain on revaluation of Investment in Scout to fair value $(47,695)0$

Net income $ $429,498$ $ $159,200$

Retained earnings, January $1$ $ $(961,700)$ $ $(636,800)$

Net income $(429,498)(159,200)$

Dividends declared $139,60042,300$

Retained earnings, December $31$ $ $(1,251,598)$ $ $(753,700)$

Current assets $ $286,900$ $ $572,900$

Investment in Scout $($equity method$)1,703,0180$

Property, plant, and equipment $845,000614,000$

Patented technology $869,600385,400$

Database $00$

Total assets $ $3,704,518$ $ $1,572,300$

Liabilities $ $(1,331,920)$ $ $(113,600)$

Common stock $(917,000)(521,000)$

Additional paid$-$in capital $(204,000)(184,000)$

Retained earnings, December $31(1,251,598)(753,700)$

Total liabilities and equities $ $(3,704,518)$ $ $(1,572,300)$

Required:

a$.$ How should Payne allocate Scout$$s total acquisition$-$date fair value $($January $1,2024)$ to the assets acquired and liabilities assumed for consolidation purposes?

b$-1.$ Calculate the Equity in earnings of Scout in Payne's pre$-$consolidation $2024$ statements.

b$-2.$ Calculate the Gain on revaluation of Investment in Scout to fair value in Payne's pre$-$consolidation $2024$ statements.

b$-3.$ Calculate the Investment in Scout in Payne's pre$-$consolidation $2024$ statements.

c$.$ Prepare a worksheet to consolidate the financial statements of these two companies as of December $31,2024.$

At year$-$end, there were no intra$-$entity receivables or payables.