Use the following information for Problems 5-4 and 5-5On Ja

Use the following information for Problems 5-4 and 5-5:On January 1, 2014, Pontiac Company acquired an 80% interest in the common stock of Stark Company for $400,000. Stark had the following balance sheet on the date of acquisition: Stark Company Balance Sheet January 1, 2014 Assets Liabilities and Equity Accounts receivable $ 40,000 Accounts payable $ 42,297 Inventory 20,000 Bonds payable 100,000 Land 35,000 Discount on bonds payable (2,297) Buildings 250,000 Common stock ($10 par) 10,000 Accumulated depreciation (50,000) Paid-in capital in excess of par 90,000 Equipment 120,000 Retained earnings 115,000 Accumulated depreciation (60,000) Total assets $355,000 Total liabilities and equity $355,000 Buildings (20-year life) are undervalued by $80,000. Equipment (5-year life) is undervalued by $50,000. Any remaining excess is considered to be goodwill.Stark issued $100,000 of 8%, 10-year bonds for $96,719 on January 1, 2011. Annual interest is paid on December 31. Pontiac purchased the bonds on January 1, 2015, for $104,770. Both companies use the straight-line method to amortize the premium/discount on the bonds. Pontiac and Stark used the following bond amortization schedules: Stark Pontiac Period Cash Interest Balance Period Cash Interest Balance 1/2011 $ 96,719 1/2011 1/2012 $8,000 $8,328 97,047 1/2012 1/2013 8,000 8,328 97,375 1/2013 1/2014 8,000 8,328 97,703 1/2014 1/2015 8,000 8,328 98,031 1/2015 $104,770 1/2016 8,000 8,328 98,359 1/2016 $8,000 $7,205 103,975 1/2017 8,000 8,328 98,687 1/2017 8,000 7,205 103,180 1/2018 8,000 8,328 99,015 1/2018 8,000 7,205 102,385 1/2019 8,000 8,328 99,343 1/2019 8,000 7,205 101,590 1/2020 8,000 8,328 99,671 1/2020 8,000 7,205 100,795 1/2021 8,000 8,328 100,000* 1/2021 8,000 7,205 100,000 *Adjusted for roundingProblem 5-4 (LO 2) 80%, equity, straight-line bonds purchased this year, inventory profits.Refer to the preceding facts for Pontiac’s acquisition of 80% of Starks common stock and the bond transactions. Pontiac uses the simple equity method to account for its investment in Stark. On January 1, 2015, Stack held merchandise acquired from Pontiac for $15,000. During 2015, Pontiac sold $50,000 worth of merchandise to Stark. Stark held $20,000 of this merchandise at December 31, 2015. Stark owed Pontiac $10,000 on December 31 as a result of these intercompany sales. Pontiac has a gross profit rate of 30%. Pontiac and Stark had the trial balances on December 31, 2015, shown on next page. Pontiac Company Stark Company Cash 17,870 32,031 Accounts Receivable 90,000 60,000 Inventory 100,000 30,000 Land 150,000 45,000 Investment in Stark 435,738 Investment in Stark Bonds 103,975 Buildings 500,000 250,000 Accumulated Depreciation (300,000) (70,000) Equipment 200,000 120,000 Accumulated Depreciation (100,000) (84,000) Accounts Payable (55,000) (25,000) Bonds Payable (100,000) Discount on Bonds Payable 1,641 Common Stock (100,000) (10,000) Paid-In Capital in Excess of Par (600,000) (90,000) Retained Earnings, January 1, 2015 (400,000) (145,000) Sales (600,000) (220,000) Cost of Goods Sold 410,000 120,000 Depreciation Expense—Buildings 30,000 10,000 Depreciation Expense—Equipment 15,000 12,000 Other Expenses 109,360 45,000 Interest Revenue (7,205) Interest Expense 8,328 Subsidiary Income (19,738) Dividends Declared 20,000 10,000 Totals 0 0 RequiredPrepare the worksheet necessary to produce the consolidated financial statements for Pontiac Company and its subsidiary Stark Company for the year ended December 31, 2015. Include the determination and distribution of excess and income distribution schedules.Please see attached Excel spreadsheet to complete Problem 5-4