AUTUMN, 2023 ASSIGNMENT #2 CHAPTER 4 SUBMIT TO BE SUBMITTED AT THE START OF CLASS ON TUESDAY, 10/03/23 (70 POINTS) Priya Corporation acquired 100 percent of Sheldon Company stock on January 1, 2022 for $1,018,600 cash. Following are pre-closing trial balance amounts for Priya Corporation and Sheldon Company as of December 31, 2022: PRIYA CORPORATION SHELDON COMPANY Debit Credit Debit Credit Inventory Cash Accounts Receivable Investment in Sheldon Corp. $ 544,000 $ 235,500 294,000 148,000 473,000 210,000 1,209,470 Buildings 625,000 314,600 Land Equipment 807,000 287,000 315,000 345,000 Cost of Goods Sold 342,000 237,500 Depreciation Expense, Building 58,600 14,900 Depreciation Expense, Equipment 41,300 31,400 Selling & Administrative Expense 159,000 117,900 Dividends Declared 65,000 36,000 Accumulated Depreciation, Bldg $ 243,400 $ 59,600 Accumulated Depreciation, Equip 156,200 157,000 Accounts Payable 178,000 117,500 Bonds Payable 515,000 172,700 Common Stock ($1 par) 659,000 178,000 Additional Paid In Capital 1,374,800 352,000 Retained Earnings (01/01/2022) 788,500 287,000 Sales 791,600 654,000 Income from Sheldon Corp. $ 226,870 4,933,370 $ 4,933,370 $ 1,977,800 $ 1,977,800 Additional Information: 1. On January 1, 2022 the fair market value of Sheldon's assets equaled their book value with the exception of: Inventory - was overvalued by $9,300 (all this inventory was sold during 2022). Building - was undervalued by $76,000 (remaining useful life was estimated to be 5 years). Land- was by undervalued $48,000. Equipment - was overvalued by $21,500 (remaining useful life was estimated to be 10 years). The new Goodwill from the acquisition was impaired by $21,680 at year-end. 2. Priya Corporation uses the (full) equity method to account for its Investment in Sheldon Company. 3. The general ledger numbers given above (HINT: those in boldface) include the effects of the JOURNAL ENTRIES that were recorded by Priya at the acquisition date and during 2022 to account for its investment in Sheldon Company. These boldface figures should be used a check figures in your solution. Required: (CLEARLY SHOW ALL OF YOUR WORK). a. Analyze the Investment in Sheldon account as of the acquisition date. Determine the total "differential" and then break this amount out into the excess cost detail and (new) goodwill components. IN ORDER TO RECEIVE FULL CREDIT FOR YOUR ANSWER, BE SURE TO CLEARLY LABEL YOUR DETAIL FOR THE IDENTIFIABLE EXCESS, INCLUDING THE ASSET NAME AND WHETHER THE ASSET IS UNDERVALUED OR OVERVALUED. REQUIRED:(CLEARLY SHOW ALL OF YOUR WORK). a. Prepare the Investment Analysis for Priya Company's Investment in Sheldon account AT JANUARY 1, 2022 (10 POINTS) Fair Value of Consideration given from Priya Company to Sheldon's Shareholders: MINUS: EQUALS: Book Value of Sheldon Company's Net Identifiable Assets Differential (Excess Value). MINUS: EQUALS: Net Identifiable Excess NEW GOODWILL $ $ $ $ b. Recreate the 4 JOURNAL ENTRIES recorded by Priya with regard to its investment in Sheldon Company at January 1, 2022 and during 2022. IN ORDER TO RECEIVE FULL CREDIT FOR YOUR ANSWER, BE SURE TO SHOW YOUR WORK FOR THE NUMBERS INCLUDED IN THE AMORTIZATION OF EXCESS VALUE JOURNAL ENTRY. (10 POINTS) ASSET EXCESS COST: (OVERVALUED) OR UNDERVALUED LIFE "AMORTIZATION" AMOUNT THE RELATED EXPENSE ACCOUNT c. Using your information from b. above, calculate the 12/31/22 balances for Priya Company's Investment in Sheldon and Income from Sheldon accounts. Use the T accounts provided below. Use the T accounts provided below. (4 POINTS) Investment in Sheldon Priya Company's General Ledger Income from Sheldon d. Prepare the 3 REQUIRED CONSOLIDATION WORKSHEET ENTRIES (BCE, AEVRE, & EVRE) at December 31, 2022. (28 POINTS) IN ORDER TO RECEIVE FULL CREDIT FOR YOUR ANSWERS, BE SURE TO CLEARLY SHOW ALL OF YOUR CALCULATIONS. BASIC CONSOLIDATION ENTRY (4 POINTS): AMORTIZATION OF EXCESS VALUE RECLASSIFICATION ENTRY (12 POINTS): {REMAINING) EXCESS VALUE RECLASSIFICATION ENTRY (12 POINTS): e. Prepare the consolidation worksheet for the period ended December 31, 2022. (18 POINTS) Accounts PRIYA CORPORATION Consolidation Worksheet For the Period Ending December 31, 2022 PRIYA'S G/L SHELDON'S G/L CONSOLIDATION ENTRIES Consolidated Debit Credit Totals Income Statement Sales $ 791,600 $ 554,000 Less: Cost of Goods Sold $ (342.000) $ (237.500) Less: Depreciation Expense, Building $ (58,600) $ (14,900) Less: Depreciation Expense, Equipment $ (41,300) $ (31,400) Less: Selling & Administrative Expense $ (159,000) $ (117,900) Less: Goodwill Impairment Loss Income from Sheldon Corp. Net Income $ 226,870 $ 417,570 $ 252,300 Statement of Retained Earnings Retained Farmings (01/01/2022) $ 788,500 $ 287,000 Net income (above) $ 417,570 $ 252,300 Dividends Declared $ (65,000) $ (36,000) Retained earnings, 12/31/22 $ 1,141,070 $ 503.300 Balance Sheet Cash $ 511,000 $ 235,500 Accounts Receivable $ 294,000 $ 148,000 Inventory $ 473,000 $ 210,000 Investment in Sheldon Corp. $ 1,209,470 Buildings $ 625,000 $ 314,600 Land $ 807,000 $ 287,000 Equipment $ 315,000 $ 345,000 Accumulated Depreciation, Bldg. $ (213.100) $ (59.600) Accumulated Depreciation, Equip $ (156,200) $ (157,000) Goodwill (NEW) Total Assets $ 3,867,870 $ 1,323,500 Accounts Payable $ 178,000 $ 117,500 Bonds Payable $ 515,000 $ 172,700 Common Stock ($1 par) $ 659,000 $ 178,000 Additional Paid In Capital $ 1,374,800 $ 352,000 Retained earnings. 12/31/22 (above) $ 1,141,070 $ 503.300 Total Liabilities & Stockholders' Equity $ 3,867,870 $ 1,323,500 NET ASSETS ASSETS - LIABILITIES TOTAL STOCKHOLDERS' EQUITY