consolidation worksheet subsequent years-equity method applied

Case 2.1 On January 1, 2011 Pak Corporation acquired Say Service Corporation for one million shares of Pak Stock, valued at $35 per share. Professional fees connected with the acquisition were $1,200,000 and costs of registering and issuing the new shares were $600,000, both paid in cash. Say performs vehicle maintenance service for owners of auto, truck and bus fleets. Say's balance sheet at acquisition date was as follow: Cash Account receivables Parts inventory Equipment Total Assets 300,000 2,700,000 5,200,000 Current Liabilities Long-term Liabilities Common Stocks Additional Paid in Capital Retained Earnings 3,100,000 8,600,000 1,700,000 3,500,000 Total Liabilities and Equity In reviewing Say's assets and liabilities at the acquisition date, Pak determined the following: On a discounted present value basis, the accounts receivables had a fair value of $2,600,000, and the long-term liabilities have a fair value of $8,000,000 with maturity of 20 years. The replacement cost of the parts inventory was $6,000,000. The turnover of short-term assets and liabilities is less than one year. The current replacement cost of the equipment was $19,500,000. The equipment had a 16-year life Say occupies its service facilities under an operating lease with ten years remaining. The rent is below current market levels, giving the lease an estimated fair value of $1,250,000 Say had long-term service contracts with several large fleet owners. These contracts have been profitable; the present value of expected profits over the remaining term (10 years) of the contracts is estimated at $2,000,000. These contracts meet the criteria for recognition separately. Say's trade name is well-known among fleet owners and is estimated to have a fair value of $200,000. The estimated remaining life was 4 years. Following are selected accounts for Pak Corporation and Say Service as of December 31, 2015 (credit balances indicated by parentheses). Several assets and liabilities accounts have been omitted. Account Income Statement Revenues Cost of Service Depreciation Amortization Interest Expenses Equity in Say's income Net Income Statement of Retained Earnings Retained earnings 1/1/2015 Net Income (above) Dividend paid Retained earnings 12/31/2015 Balance Sheet Cash Account Receivable Part inventory Equipment (net) Building Investment in Say Total Assets Current Liabilities LT Liabilities Common Stock Additional paid in capital Retained earnings 12/31/2015 Total liabilities and equities Pak Say ($8,500,000) $4,000,000 $950,000 $400,000 $1,030,500 ? ($7,130,000) $3,275,000 $1,100,000 ? $800,000 $0 ($1,955,000) ($14,700,000) ($13,672,500) ($1,955,000) ? $400,000 $690,250 ? ($15,227,500) $3,350,000 $1,000,000 $2,500,000 $7,250,000 $13,200,000 ? $710,000 $1,500,000 $3,800,000 $6,600,000 $5,000,000 ($4,200,000) ($3,000,000) ($2,800,000) ($6,400,000) ($3,550,000) ($5,870,000) ? ($1,700,000) ($3,500,000) ($15,227,500) Say reported the following figures for years preceding 12/31/2015: Net Income Dividend 2011 $1,162,500 $325,000 2012 $1,600,000 $300,000 2013 $1,485,000 $200,000 2014 $1,650,000 $300,000 2015 $1,955,000 $400,000 Pak uses the Equity method to account for investment Say has not issued or repurchased stocks in past 5 years. PREPARE CONSOLIDATION WORKSHEET FOR THE SELECTED ACCPUNTS OF PAK AND SAY (CONSOLIDATION ADJUSTMENT ENTRIES AND CONSOLIDATION TOTALS)