Assessment 2: Consolidations Prather, Inc., buys 80 percent of the outstanding common stock of Sun Corporation on January 1, 2018, for $1,496,000 cash. At the acquisition date, Sun's total fair value, including the noncontrolling interest, was assessed at $1,870,000 although Sun's book value was only $1,320,000. Also, several individual items on Sun's financial records had fair values that differed from their book values as follows. Note: Credits are indicated by parentheses. Land Buildings and equipment (10-year remaining life) Copyright (20-year life) Notes payable (due in 8 years) Book Value $132,000 605,000 220,000 (286,000) Fair Value $495.000 550.000 440,000 (264,000) For internal reporting purposes, Prather, Inc., employs the equity method to account for this investment. The following account balances are for the year ending December 31, 2018, for both companies. Using the acquisition method, determine consolidated balances for this business combination (through either individual computations or the use of a worksheet). Prather $12.992,000) 1,540,000 572,000 Revenues Cost of goods sold Depreciation expense Amortization expense Interest expense Equity in income of Sam Net income Retained earnings, 1/1/18. Net income (above) Dividends paid Retained earings, 12/31/18 Current assets Investment in Sam Land Buildings and equipment (net) Copyright Total assets Accounts payable Notes payable Common stock Additional paid-in capital Retained eamings (above) Total liabilities and equities 96,800 (231.000) $(1,014,200) $(2,783,000) (1,014,200) 572.000 S(3,225,200) $ 2.123.000 1,612,600 642.400 1,929.400 -0- $6,307,400 $(420,200) (1,012.000 (660,000) (990.000 (3,225 200) $(6,307 400 Sun $(1,188,000) 847,000 22,000 11,000 11,000 --0- $(297,000) $1968,000) (297.000) 143,000 $(1,122,000) $1,161,600 -0- 132,000 583,000 209.000 $2,085,600 $(325,600) (286,000) (220.000) (132.000) (1,122,000) S[2,085,600) Panther Corporation acquired 80 percent of the outstanding voting stock of Staffer Company on January 1, 2018, for $924,000 in cash and other consideration. At the acquisition date, Panther assessed Staffer's identifiable assets and liabilities at a collective net fair value of $1,155,000 and the fair value of the 20 percent noncontrolling interest was $231,000. No excess fair value over book value amortization accompanied the acquisition The following selected account balances are from the individual financial records of these two companies as of December 31, 2019: Sales Cost of goods sold Operating expenses Retained earnings, 1/1/19 Inventory Buildings (net) Investment income Panther $1,408,000 638,000 330.000 1,628,000 761,200 787,600 Not given Staffer $792,000 433,400 231,000 396,000 242.000 345,400 -0- Problem 1 Determine consolidated balances. Acquisition date subsidiary fair value (given) Book value of subsidiary (given) Fair value in excess of book value Allocations to specific accounts based on difference between fair value and book value: Land Buildings and equipment Copyright Notes payable: Value Allocations Total Annual excess amortizations: Buildings and equipment Copyright Notes payable Total Consolidated Totals: Revenues: Cost of goods sold: Depreciation expense: Amortization expense: Interest expense: Equity in income of Sun: Net income: Retained earnings, 1/1: Noncontrolling interest in income of subsidiary Dividends paid Retained earnings, 12/31: Current assets: Investment in Sun: Land: Buildings and equipment (net): Copyright Total assets: Accounts payable: Notes payable Noncontrolling interest in subsidiary: Common stock Additional paid-in capital Retained earings. 12/31 . . . Total liabilities and equities Acquisition Method Accounts Prather Staffer Consolidation Consolidation Noncontrolling Consolidated Debit Credit Interest Totals Revenues Cost of goods sold Depreciation expense Amortization expense Interest expense Equity in income of Sun Separate company net income Consolidated not income Noncontrolling interest in Sun's income Controlling interest in CNI Retained earnings 1/1 Net income (above) Dividends paid Retained earnings 12/31 Current assets Investment in Sun Land Buildings and equipment (net) Copyright Total assets Accounts payable Notes payable NCI in Sun 1/1 NCI in Sun 12/31 Accounts Prather Staffer Consolidation Consolidation Noncontrolling Consolidated Debit Credit Interest Totals Common stock Additional paid-in capital Retained earnings 12/31(above) Total liability and stockholders' equity