N o R On January 3, 2018, Palermo acquired all of the outstanding voiting stock of 2. Syracusa in exchange for $6,000,000 in cash Palermo elected to exercise control over Syracusa as a wholly owned subsidiary with an independent accounting system. Both companies .nave December 31 year ends. At the acquisition date, Syracusa's stockholder's equity 3 was $2,500,000, including retained eamings of $1,700,000 10 11 Palermo pursued the acquisition, in part to utilize Syracusa's technology and computer & software. These items had fair values that differed from their values on Syracusa's books as follows: DO ALL YOUR WORK IN THE SPREADSHEET TAB (RED) Remaining Round all amounts on this sheer to thousands Asset Book Value Fair Value Patented technology $ 140,000 7 years 8 Computer software $ 60,000 W 12 years 10 At December 31 2020, Syracusa owes Palermo $40,000 19 20 Syracusa's remaining identifiable assets and liabilities had acquisito-date 21 book values that closely approximated fair values. Since acquisition, no assts have 2 been impaired During the next three years, Syracusa reported the following income and didends 23 24 24 Net income Dividends 26 21 2018 S 900,000 $150.000 2019 940,000 $150,000 25 2020 $ 975,000 $150,000 30 30 32 REQUIRED: LABEL EACH STEP Points 34 31 Prepare the analysis as of acquisition date including unamortized differential at 1/1/18 and through 2 15 362 Calculate the balance in the account Investment in Sub as of 12/31/20 Show all computations 10 31 3 Prepare the journal entries Palermo recorded with respect to its investment in Syracusa for the year 15 3:4 Separately calculate consolidated net income for 2020 20 Prepare all necessary elimination entries for the year ended 2020 20 Complete the consolidated workpapers for the vear ended 12/3120 20 P CO. SCO. Co. ELIMINATIONS DR. CR. CONS.TOT. 2.250 2,720 575 1 INCOME STATEMENT 2 FYE 12/31/20 (000's) Sales 4 Equity in sub earnings 5 6 Total revenues 7 Cost of goods sold Depreciation expense 10 Amortization expense 4,970 575 0 5,545 3,295 2,250 1350 275 370 870 380 25 2,220 655 395 0 3.270 11 3 Total expenses 1995 1275 1,300 975 2,275 7,470 3,240 10.710 14 15 Net Income 16 17 RETAINED EARNINGS 10 STATEMENT 19 26 Retained Earnings 111 21 22 Net income 20 24 Dividends declared 25 26 Retained Earnings 12/31 27 20 BALANCE SHEET 1300 975 2.275 600 150 750 8.170 4,065 12,235 490 300 800 100 375 45 80 30 Current assets 31 Computer software 32 Patented technology Goodwill 34 35 Equipment > Investment in sub 37 30 19 Total assets 40 41 4. Liabilities 865 345 880 100 0 6.335 7,165 0 0 15,690 4,500 1835 7,165 10,690 5.000 520 135 2,000 800 44 Common stock 45 46 Retained earnings 47 4 Total liabilities and equi 655 0 2,800 0 12,235 0 15,690 8,170 4,065 10,690 5.000 0
