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Problem #1 On January 1, 2017, Pharma Company purchased a 90% interest in Sandy Company...

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Accounting

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Problem #1 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 eamings. The difference between implied and book value was allocated to the following assets of Sandy Company: $ 80,000 240,000 591,111 Inventory Plant and equipment (net) Goodwill 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

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