"On January 1, 2009, Plymouth Corporation acquired 80 percent of the outstanding voting stock of Sander Company in exchange for $1,200,000 cash. At that time, although Sander's book value was $925,000, Plymouth assessed Sander's total business fair value at $1,500,000. Since that time, Sander has neither issued nor reacquired any shares of its own stock. The book values of Sander's individual assets and liabilities approximated their acquisition-date fair values except for the patent account, which was undervalued by $350,000. The undervalued patents had a 5-year remaining life at the acquisition date. Any remaining excess fair value was attributed to goodwill. No goodwill impairments have occurred. Sander regularly sells inventory to Plymouth. A) Prepare a schedule that calculated the Equity in Earnings of Sander account balance. B) Prepare a worksheet to arrive at consolidated figures for external reporting purposes.."

Exam#2 There are three problems within this spreadsheet. Each problem has two tabs associated with it. Tab1 The problem information is given Tab2 Your answer to the problem is to be provided Please label your adjusting entries, ie A, S, etc. Chapter 5: On January 1, 2009, Ford Corporation acquired 80% of the outstanding voting shares of Pickup Company in exchange for $1.2 million cash. At the time, although Pickup's book value was $925,000, Ford assessed Pickup's total business fair value at $1.5 million. Since that time, Pickup has neither issued nor reacquired any shares of its own stock. The book value of Pickup's individual assets and liabilities approximated their acquisition-date fair values except for the patent account, which was undervalued by $350,000. The undervalued patents had a 5-year remaining life at the acquisition date. Any remaining excess fair value was attributed to goodwill. No goodwill impairments have occured. Pickup regularly sell inventory to Ford. Below are detail of the intra-entity inventory sales for the past three years: Pickup Company outstanding stock purchased by Ford Corp on 1/1/09 Cash paid for Pickup stock Pickup's book value at time of purchase Pickup's business fair value at time of purchase Undervaluation of Pickup's patent account at time of purchase Remaining life of patents (years) 80% $1,200,000 $925,000 $1,500,000 $350,000 5 Intercompany inventory sales for past three years: Year 2009 2010 2011 Intra-Entity Sales $125,000 220,000 300,000 Intra-Entity Ending Inv. Transfer Price $80,000 125,000 160,000 Gross Profit Rate on Intra-Entity Inventory Transfers 25% 28% 25% Separate financial statements as of December 31, 2011 Ford 12/31/2011 Pickup 12/31/2011 Revenues Cost of goods sold Operating expenses Amortization expense Interest expense Equity in earnings of Pickup Net income $(1,740,000) 820,000 104,000 220,000 20,000 (124,000) $(700,000) $(950,000) 500,000 85,000 120,000 15,000 $(230,000) Retained earnings, 1/1/11 Net income Dividends paid Retained earnings, 12/31/11 $(2,800,000) (700,000) 200,000 $(3,300,000) $(345,000) (230,000) 25,000 $(550,000) $535,000 575,000 990,000 1,420,000 1,025,000 950,000 $5,495,000 $115,000 215,000 800,000 863,000 107,000 $2,100,000 $(450,000) (545,000) (900,000) (300,000) (3,300,000) $(5,495,000) $(200,000) (450,000) (800,000) (100,000) (550,000) $(2,100,000) Cash Accounts receivable Inventories Investment in Pickup Buildings and equipment Patents Total assets Accounts payable Notes payable Common stock Additional paid-in capital Retained earnings 12/31/11 Total liabilities and stockholders' equity a) Prepare a schedule that calculates the Equity in Earnings of Pickup's account balance. b) Prepare a worksheet to arrive at consolidated fitures for external reporting purposes. Chapter 5: a) 2011 income reported by Pickup Excess patent fair value amortization Deferred gross profit for 12/31/11 intra-entity inventory Recognized gross profit for 1/1/11 intra-entity inventory Pickup's income adjusted To controlling interest (80%) To noncontrolling interest (20%) Name: _______________________________ $230,000 b) Revenues Cost of goods sold Depreciation expense Amortization expense Interest expense Equity earningsPickup Separate company income Consolidated net income to noncontrolling interest to controlling interest Ford -1,740,000 820,000 Pickup -950,000 500,000 104,000 220,000 20,000 -124,000 -700,000 Adjustments & Eliminations 85,000 120,000 15,000 NCI Consolidated -2,390,000 1,025,000 189,000 410,000 35,000 0 -230,000 -731,000 -700,000 Retained Earnings 1/1 -2,800,000 -345,000 Net income Dividends paid Retained earnings 12/31 Cash Accounts receivable Inventory Investment in Pickup -700,000 200,000 -3,300,000 535,000 575,000 990,000 1,420,000 -230,000 25,000 -550,000 115,000 215,000 800,000 -700,000 -3,300,000 650,000 790,000 1,750,000 0 Buildings and equipment Patents Goodwill Total Assets Accounts payable Notes payable NCI in Sander 1/1 NCI in Pickup 12/31 Common stock APIC Retained earnings 12/31 Total liab. and SE Note: Negative numbers = (credits) 1,025,000 950,000 863,000 107,000 1,888,000 1,197,000 5,495,000 2,100,000 6,500,000 -450,000 -545,000 -200,000 -450,000 -650,000 -995,000 -900,000 -300,000 -3,300,000 -5,495,000 -800,000 (S) 800,000 -100,000 (S) 100,000 -550,000 -2,100,000 2,234,000 -900,000 -300,000 -3,300,000 -6,500,000