Midterm Consolidation Problem On January 1 Year 1. Phillips Corporation (PC) acquired 60 percent (60.000 shares of S2 par common stock) of Tran Corporation CTC) for $2.800.000 in cash. Shortly after the acquisition the remaining TC shares had a fair value of $40 share. PC uses the Initial Value Method for its internal accounting. At the time of the acquisition TC has the following asset and liability accounts Current Assets PPE (20-year life) Patents (8-year life) Land Liabilities Total Net Assets Book Value $ 500,000 2,400,000 0 500,000 (400.000) $3,000,000 Fair Value $500,000 2,800,000 400,000 500,000 (400.000) $3,800,000 Difference $ 0 400,000 400,000 $ 800,000 Included in these figures is $30,000 of PC's notes payable that is a debt to Tran. No goodwill impairments have occurred since Tran was acquired by Phillips. Information about TC's Retained earnings account for Years 1 to 4 are shown below. Tran Corp. Dividends Net Income Paid 400,000 300,000 450,000 350,000 500,000 350,000 600.000 450.000 $1,950,000 1,450,000 Increase in Ending Book Value Retained Earnings 100,000 600,000 100,000 700.000 150,000 850,000 150,000 1,000,000 500,000 Determine consolidated totals for Phillips Corporation and Tran Corporation for Year 4 using the provided worksheet. Midterm Consolidation Problem On January 1 Year 1. Phillips Corporation (PC) acquired 60 percent (60.000 shares of S2 par common stock) of Tran Corporation CTC) for $2.800.000 in cash. Shortly after the acquisition the remaining TC shares had a fair value of $40 share. PC uses the Initial Value Method for its internal accounting. At the time of the acquisition TC has the following asset and liability accounts Current Assets PPE (20-year life) Patents (8-year life) Land Liabilities Total Net Assets Book Value $ 500,000 2,400,000 0 500,000 (400.000) $3,000,000 Fair Value $500,000 2,800,000 400,000 500,000 (400.000) $3,800,000 Difference $ 0 400,000 400,000 $ 800,000 Included in these figures is $30,000 of PC's notes payable that is a debt to Tran. No goodwill impairments have occurred since Tran was acquired by Phillips. Information about TC's Retained earnings account for Years 1 to 4 are shown below. Tran Corp. Dividends Net Income Paid 400,000 300,000 450,000 350,000 500,000 350,000 600.000 450.000 $1,950,000 1,450,000 Increase in Ending Book Value Retained Earnings 100,000 600,000 100,000 700.000 150,000 850,000 150,000 1,000,000 500,000 Determine consolidated totals for Phillips Corporation and Tran Corporation for Year 4 using the provided worksheet