CAPELLA UNIVERSITY 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. Book Value Fair Value Land $132,000 $495,000 Buildings and equipment (10-year remaining life) 605,000 550,000 220,000 440,000 Copyright (20-year life) Notes payable (due in 8 years) (286,000) (264,000 For internal reporting purposes, Prather, Inc., employs the equity method to account for this nvestment. 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 Sun Revenues $(2,992,000 $(1, 188,000) Cost of goods sold 1,540,000 847,000 Depreciation expense 572,000 22,000 Amortization expense -0- 11,000 Interest expense 96,800 11,000 Equity in income of Sam (231,000 -0- Net income $(1,014,200 $(297,000) Retained earnings, 1/1/18. $(2,783,000 $(968,000) Net income (above (1,014,200 (297,000) Dividends paid 572,000 143,000 Retained earnings, 12/31/18 $(3,225,200) $(1, 122,000) Current assets $ 2, 123,000 $1, 161,600 Investment in Sam 1,612,600 -0- Land 642,400 132,000 Buildings and equipment (net) 1,929,400 583,000 Copyright -0- 209,000 Total assets $6,307,400 $2,085,600 Accounts payable $(420,200) $(325,600 Notes payable (1,012,000 (286,000 Common stock (660,000 220,000 Additional paid-in capital 990,000 132,000) Retained earnings (above) (3,225,200 (1, 122,000) Total liabilities and equities $(6,307,400 $(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