Cat Co. trains and looks after cats. They want to expand their business to include dogs, and have approached Dog Co. with an offer to buy 85% of the outstanding shares of Dog Co. for $15,000 cash. The offer is accepted and control is transferred over at the end of the day on Jan 1 Year 1. Year 1 (Jan 1) Balance Sheet Before Acquisition Balance Sheet Before Acquisition Cat Co. Current Assets Carrying Value Dog Co. Carrying Value Cash 35,000 1,000 Accounts receivable 60,000 150 Inventory Short-term investments 2,000 5,000 Total Current Assets 95,000 8,150 Long-term Assets Property, plant and equipment 15,000 8,500 Acc. Depreciation, Property, plant and equipment (2,000) (3,400) Property, plant and equipment, net 13,000 5,100 Land 120,000 Long-term investments 26,000 Total Long-term Assets 159,000 5,100 Total Assets 254,000 13,250 Current Liabilities Accounts payable Wages payable Total Current Liabilities Long-term Liabilities Shareholder loan Total Long-term Liabilities Equity Common shares Required: Retained earnings Total Equity Total Liabilities and Equity 2,000 1,300 85,000 4,500 87,000 5,800 145,000 145,000 100 100 21,900 7,350 22,000 7,450 254,000 13,250 All other carrying values equal their fair values except for the following net assets: Short-term investments Inventory Total Dog Co. Fair value Carrying value 7,500 5,000 3,600 2,000 11,100 7,000 Step 1 Step 2 Step 3 Prepare the journal entries for the acquirer and acquiree upon acquisition. Calculate goodwill using the FVE method. Prepare the financial statements of each individual entity after the acquisition journal entries have been recorded. Prepare the consolidated financial statements showing all elimination entries. / 2 /3 /5