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On January 1, 2017, Paloma Corporation exchanged $1,710,000 cash for 90 percent of the outstanding voting stock of San Marco Company. The consideration transferred
On January 1, 2017, Paloma Corporation exchanged $1,710,000 cash for 90 percent of the outstanding voting stock of San Marco Company. The consideration transferred by Paloma provided a reasonable basis for assessing the total January 1, 2017, fair value of San Marco Company. At the acquisition date, San Marco reported the following owners' equity amounts in its balance sheet: $400, 000 60,000 265,000 Common stock Additional paid-in capital Retained earnings In determining its acquisition offer, Paloma noted that the values for San Marco's recorded assets and liabilities approximated their fair values. Paloma also observed that San Marco had developed internally a customer base with an assessed fair value of $800,000 that was not reflected on San Marco's books. Paloma expected both cost and revenue synergies from the combination. At the acquisition date, Paloma prepared the following fair-value allocation schedule: Fair value of San Marco Company Book value of San Marco Company $ 1,900,000 725,000 1,175,000 800,000 Excess fair value to customer base (10-year remaining life) to goodwill 375,000 At December 31, 2018, the two companies report the following balances: Paloma San Marco $ (1,843,000) 1,100,000 125,000 275,000 27,500 (121, 500) $ (675,000) 322,000 120,000 11,000 7,000 Revenues Cost of goods sold Depreciation expense Amortization expense Interest expense Equity in income of San Marco (437,000) S (2,625,000) (437,000) 350, 000 $ (2,712,000) S 1, 204,000 $ (215,000) $ (395,000) (215,000) 25,000 Net income Retained earnings, 1/1 Net income Dividends declared Retained earnings, 12/31 $ (585,000) Current assets 430,000 Investment in San Marco Buildings and equipment Copyrights 1,854,000 931,000 950,000 $ 4,939,000 S (485,000) (542,000) (900, 000) (300,000) (2,712,000) $(4,939,000) 863, 000 107,000 $ 1,400,000 $ (200,000) (155,000) (400,000) (60,000) (585,000) $(1,400,000) Total assets Accounts payable Notes payable Common stock Additional paid-in capital Retained earnings, 12/31 Total liabilities and equities Determine the consolidated balances for this business combination as of December 31, 2018. (For accounts where entries are required, combine all debit entries into one amount and enter this amount in the debit column of the w combine all credit entries into one amount and enter this amount in the credit column of the vorksheet. Amounts PALOMA CORPORATION AND SAN MARCO COMPANY Consolidation Worksheet For Year Ending December 31, 2018 Adjustments & Eliminations Noncontrolling Consolidated Accounts Paloma San Marco Interest Totals Debit Credit Revenues $(1,843,000) S (875,000) Cost of goods sold 1,100,000 322,000 Depreciation expense 125,000 120,000 Amortization expense 275,000 11,000 Interest expense 27,500 7,000 Equity in San Marco Income (121,500) Separate company net income $ (437,000) S (215,000) Consolidated net income To noncontrolling interest To Paloma Company Retained Earnings 1/1 $(2.625.000) s (395,000) Net Income (437,000) (215,000) Dividends declared 350,000 25,000 Retained Earnings 12/31 $(2,712,000) $ (585,000) Current Assets $ 1,204,000 $ 430,000 Investment in San Marco 1,854,000 Customer base Buildings and Equipment 931,000 863,000 Copyrights 950,000 107,000 Goodwill Total Assets $ 4,939,000 $ 1,400,000 Accounts Payable $ (485,000) S (200,000) Notes Payable (542,000) (155,000) NCI in San Marco Common Stock (900,000) (400,000) Additional Paid-In Capital (300,000) (80,000) Retained Earnings 12/31 (2.712,000) (585,000) Total Liab. and SE $(4.939,000) (1.400,000) Required A Required B If instead the noncontrolling interest's acquisition-date fair value is assessed at $167,500, what changes would be evident in the consolidated statements? Both goodwill and noncontrolling interest will by < Required A Required B >
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PART A PART B Items Paloma San Maro Debit Credit NCI Consolidated 1843000 S 1100000 125000 275000 Re...Get Instant Access to Expert-Tailored Solutions
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